10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2020

or

☐ Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from                      to                    

Commission File Number 1-8472

Hexcel Corporation

(Exact name of registrant as specified in its charter)

Delaware	94-1109521
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Two Stamford Plaza

281 Tresser Boulevard

Stamford, Connecticut 06901-3238

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (203) 969-0666

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	HXL	New York Stock Exchange

Preferred Share Purchase Rights New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).     Yes  ☐    No   ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 15, 2020
COMMON STOCK	83,505,784

HEXCEL CORPORATION AND SUBSIDIARIES

INDEX

			Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)
	•	Condensed Consolidated Balance Sheets — June 30, 2020 and December 31, 2019	3
	•	Condensed Consolidated Statements of Operations — The quarter and six months ended June 30, 2020 and 2019	4
	•	Condensed Consolidated Statements of Comprehensive Income — The quarter and six months ended June 30, 2020 and 2019	4
	•	Condensed Consolidated Statements of Cash Flows — The six months ended June 30, 2020 and 2019	5
	•	Condensed Consolidated Statements of Stockholders’ Equity — The quarter and six months ended June 30, 2020 and 2019	6
	•	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		26
ITEM 4.	Controls and Procedures		26
PART II.	OTHER INFORMATION		26
ITEM 1.	Legal Proceedings		26
ITEM 1A.	Risk Factors		26
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28
ITEM 6.	Exhibits		29
	SIGNATURE		30

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PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

Hexcel Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

	(Unaudited)
	June 30,			December 31,
(In millions)	2020			2019
Assets
Current assets:
Cash and cash equivalents	$	257.2		$	64.4
Accounts receivable, net		191.6		227.6
Inventories, net		316.6		333.1
Contract assets		54.7		52.7
Prepaid expenses and other current assets		29.5		27.1
Total current assets		849.6			704.9
Property, plant and equipment		3,094.9			3,075.1
Less accumulated depreciation		(1,193.1	)		(1,132.3	)
Net property, plant and equipment		1,901.8			1,942.8
Goodwill and other intangible assets, net		275.6		280.4
Investments in affiliated companies		45.0		46.5
Other assets		150.5			154.0
Total assets	$	3,222.5		$	3,128.6
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings	$	0.5		$	9.5
Accounts payable		73.2		157.6
Accrued compensation and benefits		48.6		74.4
Accrued liabilities		97.6		81.1
Total current liabilities		219.9		322.6
Commitments and contingencies (see Note 12)
Long-term debt		1,264.7			1,050.6
Retirement obligations		54.1			53.3
Other non-current liabilities		246.9			256.0
Total liabilities		1,785.6			1,682.5
Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares authorized, 109.6 shares and 109.3 shares issued at June 30, 2020 and December 31, 2019, respectively		1.1			1.1
Additional paid-in capital		844.6			829.9
Retained earnings		2,006.1			1,978.9
Accumulated other comprehensive loss		(138.0	)		(118.7	)
		2,713.8			2,691.2
Less – Treasury stock, at cost, 26.1 shares at June 30, 2020 and 25.7 shares at December 31, 2019, respectively.		(1,276.9	)		(1,245.1	)
Total stockholders' equity		1,436.9			1,446.1
Total liabilities and stockholders' equity	$	3,222.5		$	3,128.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
	(Unaudited)					(Unaudited)
	Quarter Ended June 30,					Six Months Ended June 30,
(In millions, except per share data)	2020			2019		2020		2019
Net sales	$	378.7		$	609.0	$	919.7	$	1,218.9
Cost of sales		323.8			440.2		723.9		882.9
Gross margin		54.9			168.8		195.8		336.0
Selling, general and administrative expenses		24.1			39.5		70.6		89.0
Research and technology expenses		11.3			14.2		25.3		29.1
Other operating expense		13.1			—		27.8		—
Operating income		6.4			115.1		72.1		217.9
Interest expense, net		10.7			11.9		22.7		23.9
Income (loss) before income taxes, and equity in earnings from affiliated companies		(4.3	)		103.2		49.4		194.0
Provision for (benefit from) income taxes		(3.6	)		23.6		8.2		44.2
Income (loss) before equity in earnings from affiliated companies		(0.7	)		79.6		41.2		149.8
Equity in earnings (loss) from affiliated companies		(0.3	)		1.3		0.2		3.3
Net income (loss)	$	(1.0	)	$	80.9	$	41.4	$	153.1
Basic net income (loss) per common share	$	(0.01	)	$	0.95	$	0.49	$	1.80
Diluted net income (loss) per common share	$	(0.01	)	$	0.94	$	0.49	$	1.78
Dividends per share	$	—		$	0.15	$	0.17	$	0.30
Weighted-average common shares:
Basic		83.7			85.2		83.7		85.1
Diluted		83.7			86.2		84.1		86.1

Hexcel Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
	(Unaudited)						(Unaudited)
	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
Net income (loss)	$	(1.0	)	$	80.9		$	41.4		$	153.1
Currency translation adjustments		8.8			(1.4	)		(16.0	)		(4.2	)
Net unrealized pension and other benefit actuarial gains (losses) and prior service credits (net of tax)		(0.1	)		0.1			0.8			(0.3	)
Net unrealized gains (losses) on financial instruments (net of tax)		8.6			(2.9	)		(4.1	)		(5.6	)
Total other comprehensive income (loss)		17.3			(4.2	)		(19.3	)		(10.1	)
Comprehensive income	$	16.3		$	76.7		$	22.1		$	143.0

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

	(Unaudited)
	Six Months Ended June 30,
(In millions)	2020			2019
Cash flows from operating activities
Net income	$	41.4		$	153.1
Reconciliation to net cash provided by operating activities:
Depreciation and amortization		70.4			72.7
Amortization related to financing		0.5			0.9
Deferred income taxes		(0.1	)		6.8
Equity in earnings from affiliated companies		(0.2	)		(3.3	)
Stock-based compensation		12.7			13.5
Merger and restructuring charges		27.8			—
Merger and restructuring cash payments		(20.2	)		—
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		34.3			(48.0	)
Decrease (increase) in inventories		14.6			(36.3	)
Increase in prepaid expenses and other current assets		(5.7	)		(15.8	)
(Decrease) increase in accounts payable/accrued liabilities		(95.2	)		17.4
Other – net		(6.7	)		(3.8	)
Net cash provided by operating activities		73.6			157.2
Cash flows from investing activities
Capital expenditures		(40.4	)		(99.3	)
Acquisition of business		—			(163.2	)
Net cash used for investing activities		(40.4	)		(262.5	)
Cash flows from financing activities
Repayments of Euro term loan		(49.9	)		(9.0	)
Borrowing from senior unsecured credit facility - 2024		392.0			408.0
Repayment of senior unsecured credit facility - 2024		(137.0	)		(30.0	)
Borrowing from senior unsecured credit facility - 2021		—			345.0
Repayment of senior unsecured credit facility - 2021		—			(547.0	)
Repayment of finance lease obligation and other debt, net		(0.2	)		(0.4	)
Issuance costs related to senior credit facility		—			(2.2	)
Dividends paid		(14.2	)		(25.5	)
Repurchase of stock		(24.6	)		(11.2	)
Activity under stock plans		(5.2	)		0.5
Net cash provided by financing activities		160.9			128.2
Effect of exchange rate changes on cash and cash equivalents		(1.3	)		(0.2	)
Net increase in cash and cash equivalents		192.8			22.7
Cash and cash equivalents at beginning of period		64.4			32.7
Cash and cash equivalents at end of period	$	257.2		$	55.4
Supplemental data:
Accrual basis additions to plant, property and equipment	$	33.4		$	107.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Hexcel Corporation and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Six Months ended June 30, 2020, and June 30, 2019

			Additional			Accumulated			Other						Total
			Paid-In			Retained			Comprehensive			Treasury			Stockholders’
(In millions)	Par		Capital			Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2018	$	1.1	$	798.3		$	1,726.5		$	(108.0	)	$	(1,095.9	)	$	1,322.0
Net income	—		—			72.2			—			—				72.2
Dividends paid on common stock	—		—				(12.7	)	—			—				(12.7	)
Change in other comprehensive income (loss)– net of tax	—		—			—				(5.9	)	—				(5.9	)
Stock based compensation	—			13.5		—			—				(5.5	)		8.0
Acquisition of treasury stock	—		—			—			—				(11.2	)		(11.2	)
Balance, March 31, 2019	$	1.1	$	811.8		$	1,786.0		$	(113.9	)	$	(1,112.6	)	$	1,372.4
Net income	—		—				80.9		—			—				80.9
Dividends paid on common stock	—		—				(12.8	)	—			—				(12.8	)
Change in other comprehensive income (loss)– net of tax	—		—			—				(4.2	)	—				(4.2	)
Stock based compensation	—			6.1		—			—			—				6.1
Balance, June 30, 2019	$	1.1	$	817.9		$	1,854.1		$	(118.1	)	$	(1,112.6	)	$	1,442.4
			Additional			Accumulated			Other						Total
			Paid-In			Retained			Comprehensive			Treasury			Stockholders’
(In millions)	Par		Capital			Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2019	$	1.1	$	829.9		$	1,978.9		$	(118.7	)	$	(1,245.1	)	$	1,446.1
Net income	—		—				42.4		—			—				42.4
Dividends paid on common stock	—		—				(14.2	)	—			—				(14.2	)
Change in other comprehensive income (loss)– net of tax	—		—			—				(36.6	)	—				(36.6	)
Stock based compensation	—			15.2		—			—				(7.2	)		8.0
Acquisition of treasury stock	—		—			—			—				(24.6	)		(24.6	)
Balance, March 31, 2020	$	1.1	$	845.1		$	2,007.1		$	(155.3	)	$	(1,276.9	)	$	1,421.1
Net loss	—		—				(1.0	)	—			—				(1.0	)
Dividends paid on common stock	—		—			—			—			—				—
Change in other comprehensive income (loss)– net of tax	—		—			—				17.3		—				17.3
Stock based compensation	—			(0.5	)	—			—			—				(0.5	)
Balance, June 30, 2020	$	1.1	$	844.6		$	2,006.1		$	(138.0	)	$	(1,276.9	)	$	1,436.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

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HEXCEL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Significant Accounting Policies

In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying condensed consolidated financial statements are those of Hexcel Corporation.  Refer to Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of our significant accounting policies.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC. In the opinion of management, the condensed consolidated financial statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholder’s equity for the interim periods presented.  The condensed consolidated balance sheet as of December 31, 2019 was derived from the audited 2019 consolidated balance sheet.  Interim results are not necessarily indicative of results expected for any other interim period or for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2019 Annual Report on Form 10-K.

Investments in Affiliated Companies

We have a 50% equity investment in Aerospace Composites Malaysia Sdn. Bhd. and a 25% equity investment in HexCut Services SAS.  These investments are accounted for using the equity method of accounting.      

Merger Termination

On January 12, 2020, we announced that we had entered into an agreement and plan of merger (the “Merger Agreement”) with Woodward, Inc. (“Woodward”), which provided for the combination of Hexcel and Woodward in an all stock merger of equals (the “Merger”).  In response to the impact of the novel strain of coronavirus (“COVID-19”) pandemic, on April 5, 2020, Hexcel and Woodward entered into an agreement to terminate the Merger Agreement.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The Accounting Standards Codification 326, Financial Instruments- Credit Losses (“ASC 326”) requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. We adopted the update, effective January 1, 2020, applying this standard to our Accounts Receivable and Contract Assets. Our high-quality credit review practice and good customer relationships has resulted in accounts receivable write offs below 0.5% of our annual sales. Due to the requirements of ASC 326, we have reviewed and refined our bad debt reserve process. Management reviews the average annual charge-off rate along with an assessment of current micro and macro-economic factors to determine any required reserves. If at any time management finds that there are significant changes to any of these contributing factors, the reserve will be adjusted accordingly. In the six months ended June 30, 2020 we recorded $0.2 million of reserves and there were no write-offs against receivables resulting in a reserve balance of $0.8 million at June 30, 2020.

In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We do not expect this new standard to have a significant impact to our disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which amends and aims to simplify accounting disclosure requirements regarding a number of topics including: intraperiod tax allocation, accounting for deferred taxes when there are changes in consolidation of certain investments, tax basis step up in an acquisition and the application of effective rate changes during interim periods, amongst other improvements. This standard is

7

effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We are assessing the impact of this new standard on our consolidated balance sheets, statements of operations and our future disclosures. 

Note 2 — Net Income (Loss) Per Common Share

	Quarter Ended June 30,					Six Months Ended June 30,
(In millions, except per share data)	2020			2019		2020		2019
Basic net income (loss) per common share:
Net income (loss)	$	(1.0	)	$	80.9	$	41.4	$	153.1
Weighted average common shares outstanding		83.7			85.2		83.7		85.1
Basic net income (loss) per common share	$	(0.01	)	$	0.95	$	0.49	$	1.80
Diluted net income (loss) per common share:
Net income (loss)		(1.0	)		80.9		41.4		153.1
Weighted average common shares outstanding — Basic		83.7			85.2		83.7		85.1
Plus incremental shares from assumed conversions:
Restricted stock units		—			0.4		0.2		0.4
Stock options		—			0.6		0.2		0.6
Weighted average common shares outstanding — Dilutive (1)		83.7			86.2		84.1		86.1
Diluted net (loss) income per common share (1)	$	(0.01	)	$	0.94	$	0.49	$	1.78

(1) For the quarter ended June 30, 2020, the dilutive impact of outstanding options and restricted stock units was excluded from the dilutive share count as a result of the Company’s net loss for the period.

Total shares underlying stock options of 0.8 million, were excluded from the computation of diluted net income per share for the six months ended June 30, 2020, as they were anti-dilutive. Total shares underlying stock options of 0.1 million and 0.2 million, respectively, were excluded from the computation of diluted net income per share for the three and six months ended June 30, 2019, as they were anti-dilutive.

Rights Plan

On April 6, 2020, the Company declared a dividend of one preferred share purchase right (a “right”) for each outstanding share of the Company’s common stock and adopted a stockholder rights plan, as set forth in the rights agreement entered into as of April 6, 2020, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. The dividend was payable on April 16, 2020 to stockholders of record of the Company’s common stock on such date. In general, the rights plan works by imposing a significant penalty upon any person or group which acquires 15% or more of the outstanding common stock without the prior approval of the board. If the rights become exercisable, each right will allow its holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock for $150.00. This portion of a preferred share will give the stockholder approximately the same dividend, voting and liquidation rights as would one share of common stock. The rights will not be exercisable until ten days after the public announcement that a person or group has become an “acquiring person” (as defined in the rights agreement) by obtaining beneficial ownership of 15% or more of our outstanding common stock. Prior to exercise, the right does not give its holder any dividend, voting, or liquidation rights. The rights will expire on April 6, 2021. The rights were not exercisable at anytime through June 30, 2020.

Note 3 — Inventories

(In millions)	June 30, 2020		December 31, 2019
Raw materials	$	165.0	$	154.9
Work in progress		30.0		40.9
Finished goods		121.6		137.3
Total Inventory	$	316.6	$	333.1

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Note 4 — Retirement and Other Postretirement Benefit Plans

We maintain qualified and nonqualified defined benefit retirement plans covering certain current and former U.S. and European employees, retirement savings plans covering eligible U.S. and U.K. employees and certain postretirement health care and life insurance benefit plans covering eligible U.S. retirees. We also participate in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliations.

Defined Benefit Retirement Plans

Net Periodic Benefit Costs

Net periodic benefit costs of our defined benefit retirement plans for the quarter and six months ended June 30, 2020 and 2019 were as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2020		2019		2020		2019
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.3	$	0.6	$	0.6
Interest cost		0.1		0.1		0.2		0.3
Net amortization		0.1	—			0.2	—
Net periodic benefit cost	$	0.5	$	0.4	$	1.0	$	0.9

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet for U.S. nonqualified defined benefit retirement plans:
Accrued liabilities	$	1.3	$	1.4
Other non-current liabilities		19.4		18.9
Total accrued benefit	$	20.7	$	20.3

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
European Defined Benefit Retirement Plans
Service cost	$	0.3		$	0.2		$	0.5		$	0.5
Interest cost		0.8			1.1			1.7			2.2
Expected return on plan assets		(1.7	)		(2.2	)		(3.4	)		(4.4	)
Net amortization and deferral		0.1			0.1			0.2			0.2
Net periodic benefit credit	$	(0.5	)	$	(0.8	)	$	(1.0	)	$	(1.5	)

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet for European defined benefit retirement plans:
Other assets	$	45.7	$	45.2
Accrued liabilities		1.7		0.6
Other non-current liabilities		19.3		18.9
Total accrued benefit	$	21.0	$	19.5

All costs related to our pensions are included as a component of operating income in our condensed consolidated statements of operations. For the quarters ended June 30, 2020 and 2019, amounts unrelated to service costs were a benefit of $0.6 million and $0.9 million, respectively. For the six months ended June 30, 2020 and 2019, amounts unrelated to service costs were a benefit of $1.1 million and $1.7 million, respectively.

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Contributions

We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred.  We have contributed approximately $0.3 million in the first six months of 2020 to cover unfunded benefits.  We expect to contribute a total of $1.4 million in 2020 to cover unfunded benefits.  We contributed $0.3 million to our U.S. non-qualified defined benefit retirement plans during the first six months of 2019.

We contributed $1.9 million and $2.3 million to our European defined benefit retirement plans during the six months ended June 30, 2020 and 2019, respectively.  We plan to contribute approximately $5.0 million during 2020 to our European plans.

Postretirement Health Care and Life Insurance Benefit Plans

We recorded $0.2 million of net amortization gain deferral for both the quarters ended June 30, 2020 and 2019; and $0.5 million for both the six months ended June 30, 2020 and 2019. Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarter and six months ended June 30, 2020 and 2019 were immaterial.

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.5	$	0.5
Other non-current liabilities	2.6		2.6
Total accrued benefit	$	3.1	$	3.1

Amounts contributed in connection with our postretirement plans were immaterial for both the six months ended June 30, 2020 and 2019. We periodically fund our postretirement plans to pay covered expenses as they are incurred. We expect to contribute less than $0.5 million in 2020 to cover unfunded benefits.

Note 5 –– Debt

(In millions)	June 30, 2020			December 31, 2019
Current portion of finance lease	$	0.5		$	0.6
Current portion of Euro term loan		—			8.9
Current portion of debt		0.5			9.5
Non-current portion of Euro term loan		—			41.5
Senior unsecured credit facility		568.0			313.0
4.7% senior notes --- due 2025		300.0			300.0
3.95% senior notes --- due 2027		400.0			400.0
Senior notes --- original issue discount		(1.6	)		(1.7	)
Senior notes --- deferred financing costs		(3.8	)		(4.2	)
Non-current portion of finance lease and other debt		2.1			2.0
Long-term debt		1,264.7			1,050.6
Total debt	$	1,265.2		$	1,060.1

In June 2019, the Company refinanced its senior unsecured credit facility (the “Facility”), increasing borrowing capacity from $700 million to $1 billion. The Facility matures in June 2024. The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.50%, depending upon the better of the Company’s leverage ratio or the credit rating. During the second quarter of 2020 the interest rate for the Facility increased to LIBOR + 1.125%, reflecting a change in the leverage ratio. As of June 30, 2020, total borrowings under the Facility were $568 million, which approximates fair value. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50 million. Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of June 30, 2020, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $432 million. The weighted average interest rate for the Facility was 1.98% for the six months ended June 30, 2020.

The Facility agreement contains financial and other covenants, including, but not limited to customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA)

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with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default.

In 2017, the Company issued $400 million in aggregate principal amount of 3.95% Senior Unsecured Notes due in 2027. The interest rate on these senior notes may be increased 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 5.95%. The effective interest rate for six months ended June 30, 2020 was 3.87% inclusive of approximately a 0.25% benefit of treasury locks. Based on quoted prices, the fair value of the senior unsecured notes due in 2027 was $427.7 million at June 30, 2020.

In January 2020 we used $49.9 million to repay and terminate the Euro term loan.    

In 2015, the Company issued $300 million in aggregate principal amount of 4.7% Senior Unsecured Notes due in 2025. The interest rate on these senior notes may be increased by 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 6.7%.  The effective interest rate for the six months ended June 30, 2020 was 4.83%. Based on quoted prices, the fair value of these notes was $326.7 million at June 30, 2020.

Note 6 — Derivative Financial Instruments

Interest Rate Swap and Interest Lock Agreements

In January 2020 we terminated €45 million of interest rate swaps when we repaid the European term loan recognizing a charge of $0.7 million. These interest rate swaps fixed the interest rate at a weighted average of 0.5%. These swaps were designated as cash flow hedges to floating rate bank loans, therefore, the fair value of the agreements was recorded in other assets or as a liability with a corresponding amount to other comprehensive income.

The Company had treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 3.95% Senior Unsecured Notes. These hedges were designated as cash flow hedges therefore any change in fair value was recorded as a component of other comprehensive income. As part of the issuance of these notes, we net settled the derivatives and therefore the previously deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The effect of these treasury locks reduced the effective interest rate on these notes by approximately 0.25%.  

Foreign Currency Forward Exchange Contracts

A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British Pound sterling. We entered into contracts to exchange U.S. dollars for Euros and British Pound sterling through September 2022, which we account for as cash flow hedges. The aggregate notional amount of these contracts was $363.0 million and $426.9 million at June 30, 2020 and December 31, 2019, respectively.  The purpose of these contracts is to hedge a portion of the forecasted transactions of our European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates.  The effective portion of the hedges, gains of $2.8 million and losses of $14.5 million, were recorded in other comprehensive income for the quarter and six months ended June 30, 2020 and losses of $5.2 million and $8.8 million for the quarter and six months ended June 30, 2019.  We classified $1.0 million of the carrying amount of these contracts as assets ($0.4 million of which was recorded in prepaid expenses and other current assets) and $17.3 million as liabilities ($3.6 million of which is recorded in non-current liabilities), on the condensed consolidated balance sheets at June 30, 2020, and $3.7 million of the carrying amount of these contracts was classified in assets ($1.3 million of which was recorded in prepaid expenses and other current assets) and $15.5 million as liabilities ($2.9 million of which is in other non-current liabilities) at December 31, 2019.  We recognized net losses of $5.7 million and $10.1 million in gross margin during the quarter and six months ended June 30, 2020, and net losses of $2.8 million and $4.6 million for the quarter and six months ended June 30, 2019.  

In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the re-measurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the quarters ended June 30, 2020 and 2019, we recognized net foreign exchange losses of $0.7 million and $0.9 million, respectively, in the condensed consolidated statements of operations. During the six months ended June 30, 2020 and 2019, we recognized net foreign exchange losses of $1.7 million and $0.6 million, respectively. The net

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foreign exchange impact recognized from these hedges offsets the translation exposure of these transactions. The carrying amount of the contracts for derivatives not designated as hedging instruments was less than $0.1 million classified as current liabilities at June 30, 2020, and $0.6 million classified in prepaid expenses and other current assets and less than $0.1 million of current liabilities on our consolidated balance sheets at December 31, 2019, in the condensed consolidated balance sheets.

 The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and six months ended June 30, 2020 and June 30, 2019 was as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
Unrealized losses at beginning of period, net of tax	$	(18.7	)	$	(11.4	)	$	(8.4	)	$	(10.6	)
Losses reclassified to net sales		4.4			2.2			7.7			3.5
Increase (decrease) in fair value		2.0			(4.6	)		(11.6	)		(6.7	)
Unrealized losses at end of period, net of tax	$	(12.3	)	$	(13.8	)	$	(12.3	)	$	(13.8	)

Unrealized losses of $14.2 million recorded in accumulated other comprehensive loss, less taxes of $3.4 million, as of June 30, 2020, are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.

Commodity Swap Agreements

On occasion we enter into commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile).  As of June 30, 2020, we had commodity swap agreements with a notional value of $15.1 million. The swaps mature monthly through March 2022. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items. The fair value of the commodity swap agreements was a liability of $6.2 million ($0.7 million of which was in other non-current liabilities) at June 30, 2020, and a liability of $5.4 million ($1.1 million of which was in other non-current liabilities) at December 31, 2019.

Note 7 — Income Taxes

The tax provision, a benefit of $3.6 million for the current quarter, included a $2.7 million benefit primarily for the release of reserves of unrecognized tax benefits as a result of tax audit settlements. The effective tax rate was 16.5% for the first half of 2020, compared to 22.8% for the first half of 2019. Excluding the $2.7 million benefit, the adjusted 2020 year-to-date tax rate would have been 21.9%. Our underlying estimated effective income tax rate is expected to remain at 23% for the year.

Note 8 — Fair Value Measurements

The authoritative guidance for fair value measurements establishes a hierarchy for observable and unobservable inputs used to measure fair value, into three broad levels, which are described below:

• Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

• Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

• Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value.

We have no assets or liabilities that utilize Level 1 inputs. However, we have derivative instruments classified as liabilities and assets which utilize Level 2 inputs, and one liability that utilizes Level 3 inputs.

For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value. The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). The fair value of these assets and liabilities was $1.0 million and $23.5 million and $4.3 million and $21.7 million, respectively, at June 30, 2020 and December 31,

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2019.  In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the condensed consolidated balance sheets.

Below is a summary of valuation techniques for all Level 2 financial assets and liabilities:

• Interest rate swaps — valued using LIBOR yield curves at the reporting date. The fair value of the liabilities were $0.6 million at December 31, 2019.  There were no interest rate swaps outstanding at June 30, 2020.

• Foreign exchange derivative assets and liabilities — valued using quoted forward prices at the reporting date. Fair value of assets and liabilities at June 30, 2020 was $1.0 million and $17.3 million, respectively. The fair value of assets and liabilities at December 31, 2019 was $4.3 million and $15.7 million, respectively. 

• Commodity raw materials — valued using quoted forward prices at the reporting date. Fair value of liabilities at June 30, 2020 and December 31, 2019 was $6.2 million and $5.4 million, respectively.

Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in the six months ended June 30, 2020 that would reduce the receivable amount owed, if any, to the Company.

Liabilities classified as Level 3 — At June 30, 2020 we have a liability for $3.2 million, which represents contingent consideration that was recognized in connection with the Company’s Oxford Performance Materials, Inc. acquisition. This amount was estimated based on certain contractual stipulations which require payments to be made to the seller in the future based upon the achievement of certain results. We used forecasted results which were discounted using an internally derived discount rate. Future amounts payable may differ from this estimate by the difference between the actual and forecasted results. There were no payments and the amount of interest related to this liability accreted was not material during the six months ended June 30, 2020.  

Note 9 — Revenue

Our revenue is primarily derived from the sale of inventory under long-term agreements with our customers. We have determined that individual purchase orders (“PO”), whose terms and conditions taken with a master agreement, create the ASC 606 contracts which are generally short-term in nature.  For those sales, which are not tied to a long-term agreement, we generate a PO that is subject to our standard terms and conditions. In instances where our customers acquire our goods related to government contracts, the contracts are typically subject to terms similar, or equal to, the Federal Acquisition Regulation Part 52.249-2.  This regulation contains a termination for convenience clause (“T for C”), which requires that the customer pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit.

We recognize revenue over time for those agreements that have T for C, and where the products being produced have no alternative use.  As our production cycle is typically six months or less, it is expected that goods related to the revenue recognized over time will be shipped and billed within the next twelve months. Less than half of our agreements contain provisions which would require revenue to be recognized over time.

We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the quarters and six months ended June 30, 2020 and 2019:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2020		2019		2020		2019
Consolidated Net Sales	$	378.7	$	609.0	$	919.7	$	1,218.9
Commercial Aerospace	203.9		416.5			566.8		832.0
Space & Defense		108.4		111.8		220.0		219.6
Industrial	66.4			80.7	132.9		167.3

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Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled.  Contract assets are included in our condensed consolidated balance sheets as a component of current assets. The activity related to contract assets for the six months ended June 30, 2020 is as follows:

(In millions)	Composite Material			Engineered Products			Total
Balance at December 31, 2019	$	12.8		$	39.9		$	52.7
Net revenue billed		(1.4	)		4.6			3.2
Balance at March 31, 2020	$	11.4		$	44.5		$	55.9
Net revenue billed		0.5			(1.7	)		(1.2	)
Balance at June 30, 2020	$	11.9		$	42.8		$	54.7

Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional.  

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Note 10 — Segment Information

The financial results for our operating segments are prepared using a management approach, which is consistent with the basis and manner in which we internally segregate financial information for the purpose of assisting in making internal operating decisions. We evaluate the performance of our operating segments based on operating income, and generally account for intersegment sales based on arm’s length prices.  Corporate and certain other expenses are not allocated to the operating segments, except to the extent that the expense can be directly attributable to the business segment.

Financial information for our operating segments for the quarters and six months ended June 30, 2020 and 2019 were as follows:

	(Unaudited)
	Composite			Engineered			Corporate &
(In millions)	Materials			Products			Other (a)			Total
Second Quarter 2020
Net sales to external customers	$	306.2		$	72.5		$	—		$	378.7
Intersegment sales		15.4			0.4			(15.8	)		—
Total sales	$	321.6		$	72.9		$	(15.8	)	$	378.7
Other operating expense		8.5			2.4			2.2			13.1
Operating income (loss)		20.1			(0.5	)		(13.2	)		6.4
Depreciation and amortization		30.8			4.0			0.1			34.9
Stock-based compensation		(0.3	)		(0.1	)		(1.3	)		(1.7	)
Accrual basis additions to capital expenditures		10.5			1.0			—			11.5
Second Quarter 2019
Net sales to external customers	$	484.0		$	125.0		$	—		$	609.0
Intersegment sales		21.5			—			(21.5	)		—
Total sales	$	505.5		$	125.0		$	(21.5	)	$	609.0
Operating income (loss)		111.8			16.3			(13.0	)		115.1
Depreciation and amortization		30.1			3.8			0.1			34.0
Stock-based compensation		1.1			0.4			0.9			2.4
Accrual basis additions to capital expenditures		49.0			1.1			—			50.1
Six Months Ended June 30, 2020
Net sales to external customers	$	744.7		$	175.0		$	—		$	919.7
Intersegment sales		40.2			0.9			(41.1	)		—
Total sales	$	784.9		$	175.9		$	(41.1	)	$	919.7
Other operating expense		9.1			2.7			16.0			27.8
Operating income (loss)		111.6			6.0			(45.5	)		72.1
Depreciation and amortization		62.6			7.7			0.1			70.4
Stock-based compensation		4.4			1.1			7.2			12.7
Accrual basis additions to capital expenditures		30.7			2.7			—			33.4
Six Months Ended June 30, 2019
Net sales to external customers	$	971.7		$	247.2		$	—		$	1,218.9
Intersegment sales		40.7			0.1			(40.8	)		—
Total sales	$	1,012.4		$	247.3		$	(40.8	)	$	1,218.9
Operating income (loss)		224.3			31.1			(37.5	)		217.9
Depreciation and amortization		65.0			7.6			0.1			72.7
Stock-based compensation		5.2			1.2			7.1			13.5
Accrual basis additions to capital expenditures		105.8			1.8			—			107.6

(a) We do not allocate corporate expenses to the operating segments.

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Goodwill and Intangible Assets	Composite			Engineered
(In millions)	Materials			Products			Total
Balance at December 31, 2019	$	96.2		$	184.2		$	280.4
Amortization expense		(0.9	)		(2.5	)		(3.4	)
Currency translation adjustments		(1.4	)	—				(1.4	)
Balance at June 30, 2020	$	93.9		$	181.7		$	275.6

At June 30, 2020, the balance of goodwill and intangible assets was $188.9 million and $86.7 million, respectively. During the first half of 2020 the Company determined that the economic uncertainty caused by the COVID-19 pandemic was a trigger for an impairment review of goodwill. As a result of management’s review, we determined that it was not more likely than not that there was impairment.

Note 11 — Accumulated Other Comprehensive Loss

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the condensed consolidated statements of operations. The components of accumulated other comprehensive loss as of June 30, 2020 and December 31, 2019 were as follows:

(In millions)	Unrecognized Net Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2019	$	(22.4	)	$	(6.9	)	$	(89.4	)	$	(118.7	)
Other comprehensive income (loss) before reclassifications		1.0			(14.5	)		(16.0	)		(29.5	)
Amounts reclassified from accumulated other comprehensive loss		(0.2	)		10.4		—				10.2
Other comprehensive income (loss)		0.8			(4.1	)		(16.0	)		(19.3	)
Balance at June 30, 2020	$	(21.6	)	$	(11.0	)	$	(105.4	)	$	(138.0	)

(1) Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

The amounts of net gains reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs component of accumulated other comprehensive loss for the quarter and six months ended June 30, 2020, were $0.2 million less taxes of $0.1 million, and $0.4 million less taxes of $0.2 million, respectively. The amounts reclassified to earnings from the change in fair value of the derivatives component of accumulated other comprehensive loss for the quarter and six months ended June 30, 2020 were net losses of $5.7 million less taxes of $1.3 million and $10.1 million less taxes of $2.4 million, for those related to foreign currency forward exchange contracts and $2.1 million less taxes of $0.5 million and $3.4 million less taxes of $0.8 million, related to commodity swaps. We also recorded net gains of $0.3 million with less taxes of $0.1 million and net losses of $0.1 million less taxes of less than $0.1 million related to interest rate derivatives, in the three and six month periods ended June 30, 2020, respectively. 

Note 12 — Commitments and Contingencies

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. While it is impossible to predict the ultimate resolution of litigation, investigations and claims asserted against us, we believe, based upon our examination of currently available information, our experience to date, and advice from legal counsel, that, after taking into account our existing insurance coverage and amounts already provided for, the currently pending legal proceedings against us will not have a material adverse impact on our consolidated results of operations, financial position or cash flows.

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Environmental Matters

We have been named as a potentially responsible party (“PRP”) with respect to the below hazardous waste disposal sites that we do not own or possess, which are included on, or proposed to be included on, the Superfund National Priority List of the U.S. Environmental Protection Agency (“EPA”) or on equivalent lists of various state governments. Because the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) allows for joint and several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs. We believe, based on the amount and nature of our waste, and the number of other financially viable PRPs, that our liability in connection with such environmental matters will not be material.

Lower Passaic River Study Area

Hexcel together with approximately 48 other PRPs that comprise the Lower Passaic Cooperating Parties Group (the “CPG”), are subject to a May 2007 Administrative Order on Consent (“AOC”) with the EPA requiring the CPG to perform a Remedial Investigation/Feasibility Study of environmental conditions of a 17-mile stretch of the Passaic River in New Jersey (the “Lower Passaic River”). We were included in the CPG based on our operations at our former manufacturing site in Lodi, New Jersey.        

In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower eight miles of the Lower Passaic River at an expected cost ranging from $0.97 billion to $2.07 billion. This estimate does not include any costs related to a future remedy for the upper nine miles of the Lower Passaic River. In August 2017, the EPA appointed an independent third party allocation expert to make recommendations on the relative liability of approximately 120 identified non-government PRP’s.  The allocation is expected to be completed by the end of 2020.

In October 2016, pursuant to a settlement agreement with the EPA, Occidental Chemical Corporation (“OCC”), one of the PRPs, commenced performance of the remedial design required by the ROD, reserving its right of cost contribution from all other PRPs. In June 2018, OCC filed suit against approximately 120 parties, including Hexcel, in the U.S. District Court of the District of New Jersey seeking cost recovery and contribution under CERCLA related to the Lower Passaic River. In July 2019, the court granted in part and denied in part the defendants’ motion to dismiss.  Discovery for the remaining claims is ongoing. We do not know whether this litigation will impact the EPA’s allocation process or the ultimate outcome of the matter.

The accrual was approximately $2.0 million as of June 30, 2020 and December 31, 2019. Given the uncertainty associated with the many elements of the Superfund process for the Lower Passaic River, the amounts accrued may not be indicative of the amounts for which we will ultimately be responsible.

Omega Chemical Corporation Superfund Site, Whittier, California

We are a PRP at a former chemical waste site in Whittier, California. The PRPs at Omega have established The Omega Chemical Site PRP Organized Group, (the “OPOG”), and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. The OPOG has attributed to Hexcel either 1.2% or 2.18% of the waste tonnage (dependent on the specific location within the Omega Chemical Site) sent to the site.  In addition to the Omega site specifically, the EPA is investigating the scope of regional groundwater contamination in the vicinity of the Omega site and issued a ROD. The OPOG members have been served notice by the EPA as PRPs who will be required to be involved in the remediation of the regional groundwater contamination in that vicinity as well.  As a member of the OPOG, Hexcel will incur costs associated with the investigation and remediation of the Omega site and the regional groundwater remedy, although our ultimate liability, if any, in connection with this matter cannot be determined at this time. The total accrued liability relating to potential liability for both the Omega site and regional groundwater remedies was $0.3 million at June 30, 2020 and at December 31, 2019.

Summary of Environmental Reserves

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lower Passaic River and other sites are accrued in the condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, our aggregate environmental related accruals were $2.6 million and $2.5 million, respectively, of which $0.7 million and $0.6 million, respectively, was included in current other accrued liabilities with the remainder included in other non-current liabilities.  As related to certain environmental matters the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued, for those sites where we are able to estimate our liability, at the high end of the range of possible outcomes, our accrual would have been $16 million higher at June 30, 2020 and December 31, 2019.

These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required, changes in the apportionment of costs among responsible parties and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.

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Product Warranty

We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the six months ended June 30, 2020, and accrued warranty cost, included in “other accrued liabilities” in the condensed consolidated balance sheets at June 30, 2020 and December 31, 2019, were as follows:

	Product
(In millions)	Warranties
Balance as of December 31, 2019	$	5.5
Warranty expense		1.3
Deductions and other		(2.3	)
Balance as of March 31, 2020	$	4.5
Warranty expense		—
Deductions and other		(1.5	)
Balance as of June 30, 2020	$	3.0

Note 13 — Other Operating Expense

In the second quarter of 2020, we took several cost reduction measures including eliminating approximately 30% of our labor costs through temporary salary reductions, unpaid furloughs and the elimination of over 1,500 jobs. We took a restructuring charge of $13.1 million in the second quarter primarily related to the job reductions. In the six months ended 2020, other operating expense of $27.8 million also included costs related to the terminated merger agreement with Woodward.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

We develop, manufacture, and market lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, radio frequency / electromagnetic interference (“RF/EMI”) and microwave absorbing materials, engineered honeycomb and composite structures, for use in Commercial Aerospace, Space & Defense and Industrial markets. Our products are used in a wide variety of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive, recreational products and other industrial applications.

We serve international markets through manufacturing facilities, sales offices and representatives located in the Americas, Asia Pacific, Europe, Russia, India and Africa. We are also a partner in a joint venture in Malaysia, which manufactures composite structures for Commercial Aerospace applications.

We have two segments, Composite Materials and Engineered Products. The Composite Materials segment is comprised of our carbon fiber, specialty reinforcements, resins, prepregs and other fiber-reinforced matrix materials, honeycomb core product lines and pultruded profiles.  The Engineered Products segment is comprised of lightweight high strength composite structures, RF/EMI and microwave absorbing materials, engineered core and specialty machined honeycomb products with added functionality.

On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak a pandemic. The outbreak has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

Our company is a sole provider for many programs, including critical defense programs. Consistent with national guidelines and with state and local orders to date, we currently continue to operate across our footprint with some temporary site closures. Notwithstanding our continued operations, COVID-19 has begun to have and may have further negative impacts on our operations, supply chain, transportation networks and customers all of which have and may continue to compress our margins, even after the preventative and precautionary measures that we, other businesses and governments are taking. The COVID-19 outbreak is a widespread public health crisis that is adversely affecting the economies and financial markets globally. The resulting economic downturn has, and could for an extended period of time, adversely affect demand for our products and contribute to volatile supply and demand conditions affecting prices and volumes in the markets for our products, services and raw materials. The progression of the pandemic could also continue to negatively impact our business or results of operations through the temporary closure of our operating locations or those of our customers or suppliers.

During the second quarter of 2020, our operations, margins and results were adversely impacted by lower demand for our products due to substantial reductions in original equipment manufacturer build rates combined with a move to reduce inventory throughout our supply chain, particularly carbon fiber. Since the outbreak began, we have seen the impacts of COVID-19 on our markets and operations including significant decreases in air traffic, temporary shutdowns of our customers’ and suppliers’ facilities and decreased demand from our customers. In response, we have taken certain mitigating actions to align our costs with the lower sales and to preserve liquidity including eliminating approximately 30% of our labor costs, curtailing discretionary spend, and suspending dividend payments and stock repurchases.  The extent to which COVID-19 will adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the effectiveness of actions globally to contain or mitigate its effects. While we expect the pandemic to continue to negatively impact our results of operations, cash flows and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact to us cannot be reasonably estimated at this time.

On January 12, 2020, we announced that we had entered into an agreement and plan of merger (the “Merger Agreement”) with Woodward, Inc. (“Woodward”), which provided for the combination of Hexcel and Woodward in an all stock merger of equals (the “Merger”).  In response to the impact of the COVID-19 pandemic, on April 5, 2020, Hexcel and Woodward entered into an agreement to terminate the Merger Agreement.

Net sales for the quarter were $378.7 million, 37.8% lower (38.2% in constant currency) than the $609.0 million reported for the second quarter of 2019.  Declines in demand in the Commercial Aerospace and Industrial markets drove the decrease in sales for the quarter.

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Commercial Aerospace sales of $203.9 million decreased 51.0% (51.5% in constant currency) for the quarter as compared to the second quarter of 2019.  There were significantly lower sales across all major programs as build rates across Commercial Aerospace have decreased significantly and rapidly in response to the COVID-19 pandemic. Lower sales for the Airbus A350 had the largest quarterly revenue impact compared to the second quarter of 2019. Further, initial inventory reductions in the supply chain during the second quarter of 2020 accentuated the impact of the sales decrease.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were down 25.0% for the second quarter of 2020 as compared to 2019.

Space & Defense sales of $108.4 million decreased 3.0% (3.6% in constant currency) for the quarter as compared to the second quarter of 2019. The decrease was due to lower demand from a number of international space and defense programs as aggregate U.S. space and defense sales were up nominally in the second quarter of 2020 compared to the second quarter of 2019.  

Total Industrial sales of $66.4 million for the second quarter of 2020 were down 17.7% (16.6% in constant currency) as compared to the 2019 period. Wind energy sales (the largest submarket in Industrial), experienced a decline of 14.6% compared to the second quarter of 2019 as customer demand softened.

Gross margin for the second quarter of 2020 decreased to 14.5% as compared to 27.7% for the second quarter of 2019. The dramatic reduction in demand combined with the unfavorable mix impact of lower carbon fiber sales drove the decline in margin performance in 2020.

Selling, general and administrative and research and technology expenses for the second quarter of 2020 were 34% lower than the prior year, as cost reduction actions began to take effect, including headcount reductions and minimizing discretionary spending.

Other operating expense of $13.1 million, for the second quarter of 2020, was primarily related to severance costs resulting from workforce reductions.

Operating cash flow for the first six months of 2020 was $73.6 million compared to $157.2 million in 2019 on lower earnings partially offset by lower working capital usage. Working capital used $52.0 million in 2020 as compared to $82.7 million in 2019. For the first six months of 2020, capital expenditures were $40.4 million as compared to $99.3 million in the first six months of 2019.  Free cash flow (defined as cash provided by operating activities less capital expenditures) for the six months ended June 30, 2020 was a use of $33.2 million versus $57.9 million in the comparable period of 2019.

Financial Overview

Results of Operations

	Quarter Ended June 30,									Six Months Ended June 30,
(In millions, except per share data)	2020			2019			% Change			2020			2019			% Change
Net sales	$	378.7		$	609.0			(37.8	)%	$	919.7		$	1,218.9			(24.5	)%
Net sales change in constant currency								(38.2	)%								(24.6	)%
Operating income	$	6.4		$	115.1			(94.4	)%	$	72.1		$	217.9			(66.9	)%
As a percentage of net sales		1.7	%		18.9	%					7.8	%		17.9	%
Net income (loss)		(1.0	)	80.9			N/M				41.4		153.1				(73.0	)%
Diluted net income (loss) per common share	$	(0.01	)	$	0.94		N/M			$	0.49		$	1.78			(72.5	)%

The Company uses non-GAAP financial measures, including sales and expenses measured in constant dollars (prior year sales and expenses measured at current year exchange rates); operating income, net income and earnings per share adjusted for items included in operating expense and non-operating expenses; the effective tax rate adjusted for certain out of period items; and free cash flow. Management believes these non-GAAP measurements are meaningful to investors because they provide a view of Hexcel with respect to ongoing operating results and comparisons to prior periods. These adjustments represent significant charges or credits that we believe are important to an understanding of Hexcel’s overall operating results in the periods presented. Such non-GAAP measurements are not determined in accordance with generally accepted accounting principles and should not be viewed in isolation or as an alternative to or substitutes for GAAP measures of performance. Our calculation of these measures may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating our performance. Reconciliations to adjusted operating income, adjusted net income, adjusted effective tax rate, adjusted diluted net income per share and free cash flow are provided below.

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	Operating Income
	Quarter Ended June 30,					Six Months Ended June 30,
(In millions)	2020		2019			2020		2019
GAAP operating income	$	6.4		$	115.1	$	72.1	$	217.9
Other operating expense (a)		13.1			—		27.8		—
Adjusted operating income (non-GAAP)	$	19.5		$	115.1	$	99.9	$	217.9
(a) The quarter and six months ended June 30, 2020 includes restructuring expenses as well as costs related to the terminated merger with Woodward.

	Quarter Ended June 30,										Six Months Ended June 30,
	2020						2019				2020					2019
(In millions, except per diluted share data)	Net Income (loss)			Tax Rate %			Net Income		Tax Rate %		Net Income			Tax Rate %		Net Income		Tax Rate %
GAAP	$	(1.0	)		N/M		$	80.9		22.9	$	41.4			16.5	$	153.1		22.8
Other operating expense (a)		10.1				—		—		—		21.5			—		—		—
Discrete tax benefit (b)		(2.7	)		N/M			—		—		(2.7	)		5.4		—		—
Adjusted (non-GAAP)	$	6.4			N/M		$	80.9		22.9	$	60.2			21.9	$	153.1		22.8
Adjusted diluted net income per share (non-GAAP)	$	0.08					$	0.94			$	0.72				$	1.78
(a) The quarter and six months ended June 30, 2020 includes restructuring expenses as well as costs related to the terminated merger with Woodward.
(b) The quarter and six months ended June 30, 2020 includes a tax benefit primarily due to the release of reserves of unrecognized tax benefits as a result of tax audit settlements.

	Six Months Ended June 30,
(In millions)	2020			2019
Net cash provided by operating activities	$	73.6		$	157.2
Less: Capital expenditures		(40.4	)		(99.3	)
Free cash flow (non-GAAP)	$	33.2		$	57.9

Net Sales

The following table summarizes net sales to third-party customers by segment and end market for the quarters and six months ended June 30, 2020 and 2019:

	Quarter Ended June 30,							Six Months Ended June 30,
(In millions)	2020		2019		% Change			2020		2019		% Change
Consolidated Net Sales	$	378.7	$	609.0		(37.8	)%	$	919.7	$	1,218.9		(24.5	)%
Commercial Aerospace		203.9		416.5		(51.0	)%		566.8		832.0		(31.9	)%
Space & Defense		108.4		111.8		(3.0	)%		220.0		219.6		0.2	%
Industrial	66.4			80.7		(17.7	)%	132.9		167.3			(20.6	)%
Composite Materials	$	306.2	$	484.0		(36.7	)%	$	744.7	$	971.7		(23.4	)%
Commercial Aerospace		171.8		323.7		(46.9	)%		472.0		647.1		(27.1	)%
Space & Defense		69.4		79.6		(12.8	)%		142.6		157.3		(9.3	)%
Industrial		65.0		80.7		(19.5	)%		130.1	167.3			(22.2	)%
Engineered Products	$	72.5	$	125.0		(42.0	)%	$	175.0	$	247.2		(29.2	)%
Commercial Aerospace	32.1		92.8			(65.4	)%	94.8		184.9			(48.7	)%
Space & Defense		39.0		32.2		21.1	%		77.4		62.3		24.2	%
Industrial		1.4		—	N/M				2.8		—	N/M

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Sales by Segment

Composite Materials: Net sales of $306.2 million in the second quarter of 2020 decreased $177.8 million from the $484.0 million in sales for the prior year quarter, driven by declines across all markets. Net sales of $744.7 million for the first half of 2020 decreased 23.4% compared to the same period last year. In Commercial Aerospace there were significantly lower sales across all major programs as build rates across Commercial Aerospace have decreased significantly and rapidly in response to the COVID-19 pandemic. Further, initial inventory reductions in the supply chain during the second quarter of 2020 accentuated the impact of the sales decrease. The decline in Space & Defense sales primarily related to lower military helicopter and aircraft structure sales partially offset by higher space sales. The decline in Wind energy sales primarily related to softened customer demand.

Engineered Products: Net sales of $72.5 million in the second quarter of 2020 decreased $52.5 million from the $125.0 million for 2019. Net sales of $175.0 million for the first half of 2020 decreased 29.2% compared to the same period last year.  The declines primarily reflect lower sales for the Boeing 737 MAX as well as lower build rates across Commercial Aerospace in response to the COVID-19 pandemic. The increase in Space & Defense sales reflects the growth in U.S. military helicopter programs.

Sales by Market

Commercial Aerospace sales of $203.9 million decreased 51.0% (51.5% in constant currency) for the quarter as compared to the second quarter of 2019. There were significantly lower sales across all major programs as build rates across Commercial Aerospace have decreased significantly and rapidly in response to the COVID-19 pandemic. Lower sales for the Airbus A350 had the largest quarterly revenue impact compared to the second quarter of 2019. Further, initial inventory reductions in the supply chain during the second quarter of 2020 accentuated the impact of the sales decrease. Sales of $566.8 million, for the first six months of 2020, decreased 31.9% in constant currency compared to the first six months of 2019 due to significant production cuts across the major aircraft programs during the second quarter of 2020 and only minimal sales for the Boeing 737 MAX program.

Sales to other commercial aerospace, which includes regional and business aircraft customers, were down 25.0% for the second quarter of 2020 as compared to 2019, and declined 10.6% year to date.

Space & Defense sales of $108.4 million decreased 3.0% (3.6% in constant currency) for the quarter as compared to the second quarter of 2019. The decrease was due to lower demand from a number of international space and defense programs as aggregate U.S. space and defense sales were up nominally in the second quarter of 2020 compared to the second quarter of 2019. Space & Defense sales of $220.0 million, for the first six months of 2020, were in line with the first six months of 2019.   

Total Industrial sales of $66.4 million for the second quarter of 2020 were down 17.7% (16.6% in constant currency) as compared to the 2019 period and decreased 20.6% for the first six months as compared to last year. Wind energy sales (the largest submarket in Industrial), experienced a decline of 14.6% compared to the second quarter of 2019 and 18.9% for the first six months of 2020 as compared to the same period in 2019 due to production disruptions caused by the pandemic and lower customer demand.

Gross Margin

	Quarter Ended June 30,									Six Months Ended June 30,
(In millions)	2020			2019			% Change			2020			2019			% Change
Gross margin	$	54.9		$	168.8			(67.5	)%	$	195.8		$	336.0			(41.7	)%
Percentage of sales		14.5	%		27.7	%					21.3	%		27.6	%

Gross margin for the second quarter of 2020 declined to 14.5% compared to 27.7% in the second quarter of 2019 and was 21.3% and 27.6% for the first half of 2020 and 2019. The dramatic reduction in demand combined with the unfavorable mix impact of lower carbon fiber sales drove the decline in margin performance in 2020.

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Operating Expenses

	Quarter Ended June 30,									Six Months Ended June 30,
(In millions)	2020			2019			% Change			2020			2019			% Change
SG&A expense	$	24.1		$	39.5			(39.0	)%	$	70.6		$	89.0			(20.7	)%
Percentage of sales		6.4	%		6.5	%					7.7	%		7.3	%
R&T expense	$	11.3		$	14.2			(20.4	)%	$	25.3		$	29.1			(13.1	)%
Percentage of sales		3.0	%		2.3	%					2.8	%		2.4	%

Selling, general and administrative and research and technology expenses were lower, for both the quarter and six month periods ended June 30, 2020, than the prior year’s comparable periods, as cost reduction actions began to take effect, including headcount reductions and minimizing discretionary spending.  

Operating Income

	Quarter Ended June 30,									Six Months Ended June 30,
(In millions)	2020			2019			% Change			2020			2019			% Change
Consolidated operating income	$	6.4		$	115.1			(94.4	)%	$	72.1		$	217.9			(66.9	)%
Operating margin		1.7	%		18.9	%					7.8	%		17.9	%
Composite Materials		20.1			111.8			(82.0	)%		111.6		224.3				(50.2	)%
Operating margin		6.3	%		22.1	%					14.2	%		22.2	%
Engineered Products		(0.5	)	16.3				(103.1	)%		6.0		31.1				(80.7	)%
Operating margin		(0.7	)%		13.0	%					3.4	%		12.6	%
Corporate & Other		(13.2	)		(13.0	)		1.5	%		(45.5	)		(37.5	)		21.3	%

Operating income for the second quarters of 2020 and 2019 declined to $6.4 million and $115.1 million, respectively. Operating income for the first half of 2020 and 2019 was $72.1 million and $217.9 million, respectively. The second quarter and first six month periods ended June 30, 2020 included $13.1 million and $27.8 million, respectively, of other operating expense primarily related to restructuring charges and costs related to the Merger. In 2020, operating margins were negatively impacted by the dramatic reduction in demand for our products and the margin mix impact of lower carbon fiber sales.

Interest Expense, Net

	Quarter Ended June 30,							Six Months Ended June 30,
(In millions)	2020		2019		% Change			2020		2019		% Change
Interest expense, net	$	10.7	$	11.9		(10.1	)%	$	22.7	$	23.9		(5.0	)%

Interest expense for the second quarter and six months ended June 30, 2020 was lower due to lower effective interest rates, when compared to the same periods last year.

Provision for Income Taxes

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
Income tax (benefit) expense	$	(3.6	)	$	23.6		$	8.2		$	44.2
Effective tax rate	N/M				22.9	%		16.5	%		22.8	%

The tax provision for the current quarter included a $2.7 million benefit primarily for the release of reserves of unrecognized tax benefits as a result of tax audit settlements.  The effective rate was 16.5% for the first half of 2020 compared to 22.8% for the first half of 2019. Excluding the $2.7 million benefit, the adjusted year-to-date tax rate would have been 21.9%. Our underlying estimated effective income tax rate is expected to remain at 23% for the year.  

Financial Condition

Liquidity: As of June 30, 2020, our total debt, net of cash, was $1,008.0 million, as compared to $995.7 million at December 31, 2019.  At June 30, 2020, total borrowings under our $1 billion Senior Unsecured Revolving Credit Facility (the “Facility”) were $568 million, which includes $125 million remaining from an exceptional drawdown as a purely prudent response to the pandemic. The

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Facility agreement permits us to issue letters of credit up to an aggregate amount of $50.0 million.  Any outstanding letters of credit reduce the amount available for borrowing under the Facility.  As of June 30, 2020, we had not issued any letters of credit under the Facility, resulting in undrawn availability under the Facility of $432 million.  

The Facility agreement contains financial and other covenants, including, but not limited customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default.

We expect to meet our short-term liquidity requirements (including capital expenditures) through net cash from operating activities, cash on hand and the Facility.  As of June 30, 2020, long-term liquidity requirements consist primarily of obligations under our long-term debt obligations. We do not have any significant required debt repayments until June 2024 when the Facility expires.

Operating Activities: Net cash provided by operating activities was $73.6 million for the first six months of 2020 compared to $157.2 million in the 2019 period on lower earnings partially offset by lower working capital usage. Working capital used $52.0 million in 2020 as compared to $82.7 million in 2019.

Investing Activities: Net cash used for investing activities was $40.4 million and $262.5 million in the first half of 2020 and 2019, respectively. The 2019 period included $163.2 million for the ARC Technologies, Inc. (“ARC”) acquisition. Capital expenditures were $40.4 million and $99.3 million in 2020 and 2019, respectively.

Financing Activities: Financing activities provided $160.9 million of cash in the first half of 2020 and provided $128.2 million in the same period in 2019.  Borrowings under our Facility were higher in 2020 as it included the remaining $125 million that we chose to draw down as we focused on preserving cash during this unsettled period. The 2019 period included amounts borrowed from our Facility to fund the ARC acquisition. In January 2020, the Company used $49.9 million to repay and terminate its Euro term loan. We also returned $38.8 million to stockholders from stock repurchases and dividends in the first half of 2020 compared to $36.7 million in 2019.

In response to the COVID-19 pandemic we announced that we have suspended our dividend payments and stock repurchases.

Financial Obligations and Commitments: The next significant scheduled debt maturity will not occur until 2024, when the Facility matures.  Certain sales and administrative offices, data processing equipment and manufacturing facilities are leased under operating leases.

Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect reported amounts of assets, liabilities, revenues, expenses and related disclosures.  We base our assumptions, estimates and judgments on historical experience, current trends and other factors management believes to be relevant at the time our condensed consolidated financial statements are prepared.  On a regular basis, management reviews accounting policies, assumptions, estimates and judgments to ensure our financial statements are presented fairly and in accordance with U.S. GAAP.  However, because future events and their effects cannot be determined with certainty, actual results may differ from our assumptions and estimates, and such differences could be material.

We describe our significant accounting policies and critical accounting estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Commitments and Contingencies

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. We estimate and accrue our liabilities resulting from such matters based upon a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and consultants of potential environmental liabilities and remediation costs.  We believe we have adequately accrued for these potential liabilities; however, facts and circumstances may change, such as new developments, or a change in approach, including a change in settlement strategy or in an environmental remediation plan, that could cause the actual liability to exceed the estimates, or may require adjustments to the recorded liability balances in the future.

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Our estimate of liability as a potentially responsible party and our remaining costs associated with our responsibility to remediate the Lower Passaic River in New Jersey and other sites are accrued in the condensed consolidated balance sheets. As of June 30, 2020, our aggregate environmental related accruals were $2.6 million, of which $0.7 million was included in accrued liabilities, with the remainder included in non-current liabilities. As related to certain environmental matters, the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued at the high end of the range of possible outcomes, for those sites where we are able to estimate our liability, our accrual would have been approximately $16 million higher.  These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required changes in the apportionment of costs among responsible parties, the amount of insurance coverage and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter. 

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to future prospects, developments and business strategies. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “continue,” “could,”  “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” “will” and similar terms and phrases, including references to assumptions. Such statements are based on current expectations, are inherently uncertain and are subject to changing assumptions.

Such forward-looking statements include, but are not limited to: (a) the estimates and expectations based on aircraft production rates provided by Airbus, Boeing and others; (b) the revenues we may generate from an aircraft model or program; (c) the impact of the possible push-out in deliveries of the Airbus and Boeing backlog and the impact of delays in the startup or ramp-up of new aircraft programs or the final Hexcel composite material content once the design and material selection have been completed; (d) expectations with regard to the build rate and return to service of the Boeing 737 MAX and the related impact on our revenues; (e) expectations of composite content on new commercial aircraft programs and our share of those requirements; (f) expectations regarding revenues for space and defense applications, including whether certain programs might be curtailed or discontinued; (g) expectations regarding sales for wind energy, recreation, automotive and other industrial applications; (h) expectations regarding working capital trends and expenditures and inventory levels; (i) expectations as to the level of capital expenditures and when we will complete the construction of capacity expansions and qualification of new products; (j) expectations regarding our ability to maintain and improve margins in view of the current economic environment; (k) expectations regarding the outcome of legal matters or the impact of changes in laws or regulations; (l) our projections regarding our tax rate; (m) the anticipated impact of the COVID-19 pandemic on worldwide air travel and aircraft programs, as well as on our customers and suppliers and, in turn, on our operations and financial results; and (n) the anticipated impact of the above factors and various market risks on our expectations of financial results for 2020 and beyond.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different.  Such factors include, but are not limited to, the following: the impact of the COVID-19 pandemic, including continued disruption in global financial markets, ongoing restrictions on movement and travel, employee absenteeism and reduced consumer demand for air travel, on the operations, business and financial condition of Hexcel and its customers and suppliers, reductions in sales to any significant customers, particularly Airbus, Boeing or Vestas, including reduction in revenue related to a prolonged suspension of production of the Boeing 737 MAX, as well as due to the impact of COVID-19 pandemic; inability to effectively adjust production and inventory levels to align with reduced demand; inability to effectively motivate and retain necessary workforce; changes in sales mix; changes in current pricing and cost levels; changes in aerospace delivery rates; changes in government defense procurement budgets; changes in military aerospace program technology; timely new product development or introduction; industry capacity; increased competition; availability and cost of raw materials; supply chain disruptions; inability to install, staff and qualify necessary capacity or achievement of planned manufacturing improvements; cybersecurity breaches or intrusions; currency exchange rate fluctuations; changes in global political, social and economic conditions, including, but not limited to, the effect of change in global trade policies and the exit of the U.K. from the European Union; work stoppages or other labor disruptions; and unexpected outcome of legal matters or impact of changes in laws or regulations.

Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. As a result, the foregoing factors should not be construed as exhaustive and should be read together with other cautionary statements included in this and other reports we file with the SEC. For additional information regarding certain factors that may cause our actual results to differ from those expected or anticipated see the information under the caption “Risk Factors” which is located in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as well as in Item 1A. “Risk Factors” of this Form 10-Q.  We do not undertake an obligation to update our forward-looking statements or risk factors to reflect future events or circumstances, except as otherwise required by law.

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Except for the broad effects of COVID-19 as a result of its negative impact on the global economy and major financial markets, there have been no material changes in market risk from the information provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of June 30, 2020, and with the participation of the Company's management have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.  These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit, is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our Chief Executive Officer and Chief Financial Officer have concluded that there have not been any changes in our internal control over financial reporting during the three months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The information required by Item 1 is contained within Note 12 on pages 16 through 18 of this Form 10-Q and is incorporated herein by reference.

ITEM 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition or future results. There have been no material changes in the Company’s risk factors from the aforementioned 10-K, except as set forth in the below risk factor and that, due to the termination of the Merger Agreement, the risk factors set forth in the Form 10-K under “Risks Relating to the Proposed Merger with Woodward” are no longer applicable.

Our business has been and will continue to be adversely affected by the COVID-19 pandemic. The extent to which the COVID-19 pandemic will adversely impact our business, financial condition and results of operations is highly uncertain and cannot be predicted.

In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic. The COVID-19 pandemic has created significant uncertainty and economic disruption. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the extent of the adverse impact of the COVID-19 pandemic on our business, and there is no guarantee our efforts to address the adverse impacts of COVID-19 will be effective.

 We have experienced operational interruptions as a result of COVID-19, including the temporary suspension of operations due to the inability to staff facilities or government imposed restrictions, which has had an adverse effect on the productivity and profitability of such manufacturing facilities, and in turn an adverse effect on our business and operations.  While most of our manufacturing sites are currently in operation, we have reduced or furloughed certain operations in response to government measures, employee welfare concerns and the impact of COVID-19 on the global demand and supply chain. Our manufacturing operations may be further adversely affected by impacts from COVID-19 including, among other things, additional government actions and other responsive measures, further decreases in demand and/or deeper supply chain disruptions, and health and availability of essential onsite personnel.  To comply with local regulations and ensure workplace safety, enhanced cleaning and sanitation procedures and protocols for the use of personal protective equipment have been instituted, as well as work cell zoning to ensure social distancing, for those sites that remain operational.

26

In addition, several countries, including the United States, have taken steps to restrict air travel, and many companies have adopted policies prohibiting non-essential business travel by their employees.  Even in the absence of formal restrictions and prohibitions, contagious illness and fear of contagion adversely affects travel behavior.  Approximately 68% of our net sales for fiscal year ended December 31, 2019 were derived from sales to Commercial Aerospace customers, which included 87% from Airbus and Boeing aircraft, and 13% from regional and business aircraft. Current travel restrictions, as well as changes in the propensity for the general public to travel by air as a result of the COVID-19 pandemic, has caused reductions in demand for commercial aircraft, which has had an adverse impact our net sales and operating results and may continue to do so for an extended period of time.  While we are unable to predict the magnitude and duration of such impact at this time, the loss of, or significant reduction in, purchases by Airbus or Boeing will materially impair our business, operating results, prospects and financial condition.

Furthermore, the COVID-19 pandemic has resulted in market volatility which has caused a precipitous decline in our stock price subjecting us to increased takeover risk, impaired our ability to declare dividends or other distributions and conduct share buybacks, and may impact our ability to comply with the covenants contained in the agreements that govern our indebtedness and raise additional funds when and as needed.  We may also incur additional costs to remedy damages caused by business disruptions, performance delays or interruptions, payment defaults or bankruptcy of our third-party customers and suppliers, which could adversely affect our financial condition and results of operations.

To the extent the COVID-19 pandemic or any worsening of the global business and economic environment as a result thereof adversely affects our business and financial results, it may also have the effect of heightening or exacerbating many of the other risks described in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2019, such as those relating to the cyclical nature of the markets in which we operate, our ability to maintain manufacturing efficiency, disruption of our operations at our manufacturing facilities or in our supply chain, cybersecurity threats and risks generally associated with international business operations.

 Due to the evolving and highly uncertain nature of this event, we cannot predict at this time the full extent to which the COVID-19 pandemic will adversely impact our business, results and financial condition, which will depend on many factors that are not known at this time. These include, among others, the extent of harm to public health, the continued disruption to the manufacturing of and demand for our products, our ability to effectively manage inventory levels and adjust our production schedules to align with reduced demand, potential future restructuring, impairment and other charges, the impact of the global business and economic environment on liquidity and the availability of capital, the costs incurred to keep our employees safe while maintaining continued operations, and our ability to effectively motivate and retain the necessary workforce. We are staying in close communication with our manufacturing facilities, employees, customers, and suppliers, and acting to mitigate the impact of this dynamic and evolving situation through cost-savings and other measures, which may not be successful and are subject to the factors described above, many of which are uncertain or outside of our control.

27

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Period	(a) Total Number of Shares or Units Purchased		(b) Average Price Paid per share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1 — April 30, 2020		—	$	—		—	$	217,162,739
May 1 — May 31, 2020		—		—		—	$	217,162,739
June 1 — June 30, 2020		—		—		—	$	217,162,739
Total		—	$	—		—	$	217,162,739	(1)

(1) On May 7, 2018, we announced that our Board authorized us to repurchase an additional $500 million of our outstanding common stock of which $217.2 million was still available at June 30, 2020. The Company has suspended share repurchases under this program as a result of current economic conditions related to the COVID-19 pandemic.

ITEMS 3, 4 and 5 are not applicable, and therefore have been omitted.

28

ITEM 6. Exhibits

EXHIBIT INDEX

Exhibit No.	Description
3.1	Certificate of Designations of Series A Junior Participating Preferred Stock of Hexcel Corporation, as filed with the Secretary of the State of Delaware on April 6, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 6, 2020).
4.1	Rights Agreement, dated as of April 6, 2020, between Hexcel Corporation and American Stock Transfer & Trust Company, LLC, which includes the form of Certificate of Designations as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 6, 2020).
10.1	Mutual Termination Agreement, dated as of April 5, 2020, between Hexcel Corporation, Woodward, Inc. and Genesis Merger Sub, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 6, 2020).
31.1	Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document: The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101.

29

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Hexcel Corporation
July 27, 2020	/s/ Kimberly Hendricks
(Date)	Kimberly Hendricks
	Senior Vice President, Corporate Controller and
	Chief Accounting Officer (on behalf of the registrant and as the registrant’s Principal Accounting Officer)

30

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Nick L. Stanage, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hexcel Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 27, 2020	/s/ Nick L. Stanage
(Date)	Nick L. Stanage
	Chairman of the Board of Directors,
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Patrick Winterlich, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hexcel Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 27, 2020	/s/ Patrick Winterlich
(Date)	Patrick Winterlich
	Executive Vice President and
	Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hexcel Corporation (the “Company”) on Form 10-Q for the period ending June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nick L. Stanage, Chairman of the Board of Directors, Chief Executive Officer and President of the Company, and Patrick Winterlich, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

July 27, 2020	/s/ Nick L. Stanage
(Date)	Nick L. Stanage
	Chairman of the Board of Directors,
	Chief Executive Officer and President
July 27, 2020	/s/ Patrick Winterlich
(Date)	Patrick Winterlich
	Executive Vice President and
	Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Hexcel Corporation and will be retained by Hexcel Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Jul. 15, 2020
Document Information [Line Items]
Entity Registrant Name	Hexcel Corporation
Entity Central Index Key	0000717605
Document Type	10-Q
Document Period End Date	Jun. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		83,505,784
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity File Number	1-8472
Entity Tax Identification Number	94-1109521
Entity Address, Address Line One	Two Stamford Plaza
Entity Address, Address Line Two	281 Tresser Boulevard
Entity Address, City or Town	Stamford
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06901-3238
City Area Code	(203)
Local Phone Number	969-0666
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Document Quarterly Report	true
Document Transition Report	false
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, par value $0.01
Trading Symbol	HXL
Security Exchange Name	NYSE
Preferred Share Purchase Rights
Document Information [Line Items]
Title of 12(b) Security	Preferred Share Purchase Rights
No Trading Symbol Flag	true
Security Exchange Name	NYSE

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 257.2	$ 64.4
Accounts receivable, net	191.6	227.6
Inventories, net	316.6	333.1
Contract assets	54.7	52.7
Prepaid expenses and other current assets	29.5	27.1
Total current assets	849.6	704.9
Property, plant and equipment	3,094.9	3,075.1
Less accumulated depreciation	(1,193.1)	(1,132.3)
Net property, plant and equipment	1,901.8	1,942.8
Goodwill and other intangible assets, net	275.6	280.4
Investments in affiliated companies	45.0	46.5
Other assets	150.5	154.0
Total assets	3,222.5	3,128.6
Current liabilities:
Short-term borrowings	0.5	9.5
Accounts payable	73.2	157.6
Accrued compensation and benefits	48.6	74.4
Accrued liabilities	97.6	81.1
Total current liabilities	219.9	322.6
Commitments and contingencies (see Note 12)
Long-term debt	1,264.7	1,050.6
Retirement obligations	54.1	53.3
Other non-current liabilities	246.9	256.0
Total liabilities	1,785.6	1,682.5
Stockholders' equity:
Common stock, $0.01 par value, 200.0 shares authorized, 109.6 shares and 109.3 shares issued at June 30, 2020 and December 31, 2019, respectively	1.1	1.1
Additional paid-in capital	844.6	829.9
Retained earnings	2,006.1	1,978.9
Accumulated other comprehensive loss	(138.0)	(118.7)
Total stockholders' equity including treasury stock value	2,713.8	2,691.2
Less – Treasury stock, at cost, 26.1 shares at June 30, 2020 and 25.7 shares at December 31, 2019, respectively.	(1,276.9)	(1,245.1)
Total stockholders' equity	1,436.9	1,446.1
Total liabilities and stockholders' equity	$ 3,222.5	$ 3,128.6

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000.0	200,000,000.0
Common stock, shares issued	109,600,000	109,300,000
Treasury stock, shares	26,100,000	25,700,000

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Statement [Abstract]
Net sales		$ 378.7	$ 609.0	$ 919.7	$ 1,218.9
Cost of sales		323.8	440.2	723.9	882.9
Gross margin		54.9	168.8	195.8	336.0
Selling, general and administrative expenses		24.1	39.5	70.6	89.0
Research and technology expenses		11.3	14.2	25.3	29.1
Other operating expense		13.1		27.8
Operating income		6.4	115.1	72.1	217.9
Interest expense, net		10.7	11.9	22.7	23.9
Income (loss) before income taxes, and equity in earnings from affiliated companies		(4.3)	103.2	49.4	194.0
Provision for (benefit from) income taxes		(3.6)	23.6	8.2	44.2
Income (loss) before equity in earnings from affiliated companies		(0.7)	79.6	41.2	149.8
Equity in earnings (loss) from affiliated companies		(0.3)	1.3	0.2	3.3
Net income (loss)		$ (1.0)	$ 80.9	$ 41.4	$ 153.1
Basic net income (loss) per common share		$ (0.01)	$ 0.95	$ 0.49	$ 1.80
Diluted net income (loss) per common share	[1]	$ (0.01)	0.94	0.49	1.78
Dividends per share			$ 0.15	$ 0.17	$ 0.30
Weighted-average common shares:
Basic		83.7	85.2	83.7	85.1
Diluted	[1]	83.7	86.2	84.1	86.1

[1] For the quarter ended June 30, 2020, the dilutive impact of outstanding options and restricted stock units was excluded from the dilutive share count as a result of the Company’s net loss for the period.

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ (1.0)	$ 80.9	$ 41.4	$ 153.1
Currency translation adjustments	8.8	(1.4)	(16.0)	(4.2)
Net unrealized pension and other benefit actuarial gains (losses) and prior service credits (net of tax)	(0.1)	0.1	0.8	(0.3)
Net unrealized gains (losses) on financial instruments (net of tax)	8.6	(2.9)	(4.1)	(5.6)
Total other comprehensive income (loss)	17.3	(4.2)	(19.3)	(10.1)
Comprehensive income	$ 16.3	$ 76.7	$ 22.1	$ 143.0

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities
Net income	$ 41.4	$ 153.1
Reconciliation to net cash provided by operating activities:
Depreciation and amortization	70.4	72.7
Amortization related to financing	0.5	0.9
Deferred income taxes	(0.1)	6.8
Equity in earnings from affiliated companies	(0.2)	(3.3)
Stock-based compensation	12.7	13.5
Merger and restructuring charges	27.8
Merger and restructuring cash payments	(20.2)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	34.3	(48.0)
Decrease (increase) in inventories	14.6	(36.3)
Increase in prepaid expenses and other current assets	(5.7)	(15.8)
(Decrease) increase in accounts payable/accrued liabilities	(95.2)	17.4
Other – net	(6.7)	(3.8)
Net cash provided by operating activities	73.6	157.2
Cash flows from investing activities
Capital expenditures	(40.4)	(99.3)
Acquisition of business		(163.2)
Net cash used for investing activities	(40.4)	(262.5)
Cash flows from financing activities
Repayments of Euro term loan	(49.9)	(9.0)
Repayment of finance lease obligation and other debt, net	(0.2)	(0.4)
Dividends paid	(14.2)	(25.5)
Repurchase of stock	(24.6)	(11.2)
Activity under stock plans	(5.2)	0.5
Net cash provided by financing activities	160.9	128.2
Effect of exchange rate changes on cash and cash equivalents	(1.3)	(0.2)
Net increase in cash and cash equivalents	192.8	22.7
Cash and cash equivalents at beginning of period	64.4	32.7
Cash and cash equivalents at end of period	257.2	55.4
Supplemental data:
Accrual basis additions to plant, property and equipment	33.4	107.6
Senior unsecured credit facility
Cash flows from financing activities
Issuance costs related to senior credit facility		(2.2)
Senior unsecured credit facility - due 2024
Cash flows from financing activities
Borrowing from senior unsecured credit facility	392.0	408.0
Repayment of senior unsecured credit facility	$ (137.0)	(30.0)
Senior unsecured credit facility - due 2021
Cash flows from financing activities
Borrowing from senior unsecured credit facility		345.0
Repayment of senior unsecured credit facility		$ (547.0)

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions	Total	Par	Additional Paid-In Capital	Accumulated Retained Earnings	Other Comprehensive Income (Loss)	Treasury Stock
Balance at Dec. 31, 2018	$ 1,322.0	$ 1.1	$ 798.3	$ 1,726.5	$ (108.0)	$ (1,095.9)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	72.2			72.2
Dividends paid on common stock	(12.7)			(12.7)
Change in other comprehensive income (loss)– net of tax	(5.9)				(5.9)
Stock based compensation	8.0		13.5			(5.5)
Acquisition of treasury stock	(11.2)					(11.2)
Balance at Mar. 31, 2019	1,372.4	1.1	811.8	1,786.0	(113.9)	(1,112.6)
Balance at Dec. 31, 2018	1,322.0	1.1	798.3	1,726.5	(108.0)	(1,095.9)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	153.1
Change in other comprehensive income (loss)– net of tax	(10.1)
Balance at Jun. 30, 2019	1,442.4	1.1	817.9	1,854.1	(118.1)	(1,112.6)
Balance at Mar. 31, 2019	1,372.4	1.1	811.8	1,786.0	(113.9)	(1,112.6)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	80.9			80.9
Dividends paid on common stock	(12.8)			(12.8)
Change in other comprehensive income (loss)– net of tax	(4.2)				(4.2)
Stock based compensation	6.1		6.1
Balance at Jun. 30, 2019	1,442.4	1.1	817.9	1,854.1	(118.1)	(1,112.6)
Balance at Dec. 31, 2019	1,446.1	1.1	829.9	1,978.9	(118.7)	(1,245.1)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	42.4			42.4
Dividends paid on common stock	(14.2)			(14.2)
Change in other comprehensive income (loss)– net of tax	(36.6)				(36.6)
Stock based compensation	8.0		15.2			(7.2)
Acquisition of treasury stock	(24.6)					(24.6)
Balance at Mar. 31, 2020	1,421.1	1.1	845.1	2,007.1	(155.3)	(1,276.9)
Balance at Dec. 31, 2019	1,446.1	1.1	829.9	1,978.9	(118.7)	(1,245.1)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	41.4
Change in other comprehensive income (loss)– net of tax	(19.3)
Balance at Jun. 30, 2020	1,436.9	1.1	844.6	2,006.1	(138.0)	(1,276.9)
Balance at Mar. 31, 2020	1,421.1	1.1	845.1	2,007.1	(155.3)	(1,276.9)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	(1.0)			(1.0)
Change in other comprehensive income (loss)– net of tax	17.3				17.3
Stock based compensation	(0.5)		(0.5)
Balance at Jun. 30, 2020	$ 1,436.9	$ 1.1	$ 844.6	$ 2,006.1	$ (138.0)	$ (1,276.9)

XML

Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Significant Accounting Policies

Note 1 — Significant Accounting Policies

In these notes, the terms “Hexcel,” “the Company,” “we,” “us,” or “our” mean Hexcel Corporation and subsidiary companies. The accompanying condensed consolidated financial statements are those of Hexcel Corporation.  Refer to Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of our significant accounting policies.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC. In the opinion of management, the condensed consolidated financial statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholder’s equity for the interim periods presented.  The condensed consolidated balance sheet as of December 31, 2019 was derived from the audited 2019 consolidated balance sheet.  Interim results are not necessarily indicative of results expected for any other interim period or for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2019 Annual Report on Form 10-K.

Investments in Affiliated Companies

We have a 50% equity investment in Aerospace Composites Malaysia Sdn. Bhd. and a 25% equity investment in HexCut Services SAS.  These investments are accounted for using the equity method of accounting.      

Merger Termination

On January 12, 2020, we announced that we had entered into an agreement and plan of merger (the “Merger Agreement”) with Woodward, Inc. (“Woodward”), which provided for the combination of Hexcel and Woodward in an all stock merger of equals (the “Merger”).  In response to the impact of the novel strain of coronavirus (“COVID-19”) pandemic, on April 5, 2020, Hexcel and Woodward entered into an agreement to terminate the Merger Agreement.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The Accounting Standards Codification 326, Financial Instruments- Credit Losses (“ASC 326”) requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. We adopted the update, effective January 1, 2020, applying this standard to our Accounts Receivable and Contract Assets. Our high-quality credit review practice and good customer relationships has resulted in accounts receivable write offs below 0.5% of our annual sales. Due to the requirements of ASC 326, we have reviewed and refined our bad debt reserve process. Management reviews the average annual charge-off rate along with an assessment of current micro and macro-economic factors to determine any required reserves. If at any time management finds that there are significant changes to any of these contributing factors, the reserve will be adjusted accordingly. In the six months ended June 30, 2020 we recorded $0.2 million of reserves and there were no write-offs against receivables resulting in a reserve balance of $0.8 million at June 30, 2020.

In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We do not expect this new standard to have a significant impact to our disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which amends and aims to simplify accounting disclosure requirements regarding a number of topics including: intraperiod tax allocation, accounting for deferred taxes when there are changes in consolidation of certain investments, tax basis step up in an acquisition and the application of effective rate changes during interim periods, amongst other improvements. This standard is

effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We are assessing the impact of this new standard on our consolidated balance sheets, statements of operations and our future disclosures. 

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Net Income (Loss) Per Common Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Net Income (Loss) Per Common Share

Note 2 — Net Income (Loss) Per Common Share

	Quarter Ended June 30,					Six Months Ended June 30,
(In millions, except per share data)	2020			2019		2020		2019
Basic net income (loss) per common share:
Net income (loss)	$	(1.0	)	$	80.9	$	41.4	$	153.1
Weighted average common shares outstanding		83.7			85.2		83.7		85.1
Basic net income (loss) per common share	$	(0.01	)	$	0.95	$	0.49	$	1.80
Diluted net income (loss) per common share:
Net income (loss)		(1.0	)		80.9		41.4		153.1
Weighted average common shares outstanding — Basic		83.7			85.2		83.7		85.1
Plus incremental shares from assumed conversions:
Restricted stock units		—			0.4		0.2		0.4
Stock options		—			0.6		0.2		0.6
Weighted average common shares outstanding — Dilutive (1)		83.7			86.2		84.1		86.1
Diluted net (loss) income per common share (1)	$	(0.01	)	$	0.94	$	0.49	$	1.78

(1) For the quarter ended June 30, 2020, the dilutive impact of outstanding options and restricted stock units was excluded from the dilutive share count as a result of the Company’s net loss for the period.

Total shares underlying stock options of 0.8 million, were excluded from the computation of diluted net income per share for the six months ended June 30, 2020, as they were anti-dilutive. Total shares underlying stock options of 0.1 million and 0.2 million, respectively, were excluded from the computation of diluted net income per share for the three and six months ended June 30, 2019, as they were anti-dilutive.

Rights Plan

On April 6, 2020, the Company declared a dividend of one preferred share purchase right (a “right”) for each outstanding share of the Company’s common stock and adopted a stockholder rights plan, as set forth in the rights agreement entered into as of April 6, 2020, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. The dividend was payable on April 16, 2020 to stockholders of record of the Company’s common stock on such date. In general, the rights plan works by imposing a significant penalty upon any person or group which acquires 15% or more of the outstanding common stock without the prior approval of the board. If the rights become exercisable, each right will allow its holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock for $150.00. This portion of a preferred share will give the stockholder approximately the same dividend, voting and liquidation rights as would one share of common stock. The rights will not be exercisable until ten days after the public announcement that a person or group has become an “acquiring person” (as defined in the rights agreement) by obtaining beneficial ownership of 15% or more of our outstanding common stock. Prior to exercise, the right does not give its holder any dividend, voting, or liquidation rights. The rights will expire on April 6, 2021. The rights were not exercisable at anytime through June 30, 2020.

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Inventories

6 Months Ended

Jun. 30, 2020

Inventory Disclosure [Abstract]

Inventories

Note 3 — Inventories

(In millions)	June 30, 2020		December 31, 2019
Raw materials	$	165.0	$	154.9
Work in progress		30.0		40.9
Finished goods		121.6		137.3
Total Inventory	$	316.6	$	333.1

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Retirement and Other Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2020

Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract]

Retirement and Other Postretirement Benefit Plans

Note 4 — Retirement and Other Postretirement Benefit Plans

We maintain qualified and nonqualified defined benefit retirement plans covering certain current and former U.S. and European employees, retirement savings plans covering eligible U.S. and U.K. employees and certain postretirement health care and life insurance benefit plans covering eligible U.S. retirees. We also participate in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliations.

Defined Benefit Retirement Plans

Net Periodic Benefit Costs

Net periodic benefit costs of our defined benefit retirement plans for the quarter and six months ended June 30, 2020 and 2019 were as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2020		2019		2020		2019
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.3	$	0.6	$	0.6
Interest cost		0.1		0.1		0.2		0.3
Net amortization		0.1	—			0.2	—
Net periodic benefit cost	$	0.5	$	0.4	$	1.0	$	0.9

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet for U.S. nonqualified defined benefit retirement plans:
Accrued liabilities	$	1.3	$	1.4
Other non-current liabilities		19.4		18.9
Total accrued benefit	$	20.7	$	20.3

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
European Defined Benefit Retirement Plans
Service cost	$	0.3		$	0.2		$	0.5		$	0.5
Interest cost		0.8			1.1			1.7			2.2
Expected return on plan assets		(1.7	)		(2.2	)		(3.4	)		(4.4	)
Net amortization and deferral		0.1			0.1			0.2			0.2
Net periodic benefit credit	$	(0.5	)	$	(0.8	)	$	(1.0	)	$	(1.5	)

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet for European defined benefit retirement plans:
Other assets	$	45.7	$	45.2
Accrued liabilities		1.7		0.6
Other non-current liabilities		19.3		18.9
Total accrued benefit	$	21.0	$	19.5

All costs related to our pensions are included as a component of operating income in our condensed consolidated statements of operations. For the quarters ended June 30, 2020 and 2019, amounts unrelated to service costs were a benefit of $0.6 million and $0.9 million, respectively. For the six months ended June 30, 2020 and 2019, amounts unrelated to service costs were a benefit of $1.1 million and $1.7 million, respectively.

Contributions

We generally fund our U.S. non-qualified defined benefit retirement plans when benefit payments are incurred.  We have contributed approximately $0.3 million in the first six months of 2020 to cover unfunded benefits.  We expect to contribute a total of $1.4 million in 2020 to cover unfunded benefits.  We contributed $0.3 million to our U.S. non-qualified defined benefit retirement plans during the first six months of 2019.

We contributed $1.9 million and $2.3 million to our European defined benefit retirement plans during the six months ended June 30, 2020 and 2019, respectively.  We plan to contribute approximately $5.0 million during 2020 to our European plans.

Postretirement Health Care and Life Insurance Benefit Plans

We recorded $0.2 million of net amortization gain deferral for both the quarters ended June 30, 2020 and 2019; and $0.5 million for both the six months ended June 30, 2020 and 2019. Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarter and six months ended June 30, 2020 and 2019 were immaterial.

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.5	$	0.5
Other non-current liabilities	2.6		2.6
Total accrued benefit	$	3.1	$	3.1

Amounts contributed in connection with our postretirement plans were immaterial for both the six months ended June 30, 2020 and 2019. We periodically fund our postretirement plans to pay covered expenses as they are incurred. We expect to contribute less than $0.5 million in 2020 to cover unfunded benefits.

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Debt

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Debt

Note 5 –– Debt

(In millions)	June 30, 2020			December 31, 2019
Current portion of finance lease	$	0.5		$	0.6
Current portion of Euro term loan		—			8.9
Current portion of debt		0.5			9.5
Non-current portion of Euro term loan		—			41.5
Senior unsecured credit facility		568.0			313.0
4.7% senior notes --- due 2025		300.0			300.0
3.95% senior notes --- due 2027		400.0			400.0
Senior notes --- original issue discount		(1.6	)		(1.7	)
Senior notes --- deferred financing costs		(3.8	)		(4.2	)
Non-current portion of finance lease and other debt		2.1			2.0
Long-term debt		1,264.7			1,050.6
Total debt	$	1,265.2		$	1,060.1

In June 2019, the Company refinanced its senior unsecured credit facility (the “Facility”), increasing borrowing capacity from $700 million to $1 billion. The Facility matures in June 2024. The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.50%, depending upon the better of the Company’s leverage ratio or the credit rating. During the second quarter of 2020 the interest rate for the Facility increased to LIBOR + 1.125%, reflecting a change in the leverage ratio. As of June 30, 2020, total borrowings under the Facility were $568 million, which approximates fair value. The Facility agreement permits us to issue letters of credit up to an aggregate amount of $50 million. Outstanding letters of credit reduce the amount available for borrowing under the Facility. As of June 30, 2020, there were no issued letters of credit under the Facility, resulting in undrawn availability under the Facility of $432 million. The weighted average interest rate for the Facility was 1.98% for the six months ended June 30, 2020.

The Facility agreement contains financial and other covenants, including, but not limited to customary restrictions on the incurrence of debt by our subsidiaries and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio. As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA)

with a step up to 4.25 allowed following certain acquisitions. In addition, the Facility agreement contains other customary terms and conditions such as representations and warranties, additional covenants and events of default.

In 2017, the Company issued $400 million in aggregate principal amount of 3.95% Senior Unsecured Notes due in 2027. The interest rate on these senior notes may be increased 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 5.95%. The effective interest rate for six months ended June 30, 2020 was 3.87% inclusive of approximately a 0.25% benefit of treasury locks. Based on quoted prices, the fair value of the senior unsecured notes due in 2027 was $427.7 million at June 30, 2020.

In January 2020 we used $49.9 million to repay and terminate the Euro term loan.    

In 2015, the Company issued $300 million in aggregate principal amount of 4.7% Senior Unsecured Notes due in 2025. The interest rate on these senior notes may be increased by 0.25% each time a credit rating applicable to the notes is downgraded. Conversely, such increases would be reversed should the credit rating be subsequently upgraded. The maximum rate is 6.7%.  The effective interest rate for the six months ended June 30, 2020 was 4.83%. Based on quoted prices, the fair value of these notes was $326.7 million at June 30, 2020.

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 6 — Derivative Financial Instruments

Interest Rate Swap and Interest Lock Agreements

In January 2020 we terminated €45 million of interest rate swaps when we repaid the European term loan recognizing a charge of $0.7 million. These interest rate swaps fixed the interest rate at a weighted average of 0.5%. These swaps were designated as cash flow hedges to floating rate bank loans, therefore, the fair value of the agreements was recorded in other assets or as a liability with a corresponding amount to other comprehensive income.

The Company had treasury lock agreements to protect against unfavorable movements in the benchmark treasury rate related to the issuance of our 3.95% Senior Unsecured Notes. These hedges were designated as cash flow hedges therefore any change in fair value was recorded as a component of other comprehensive income. As part of the issuance of these notes, we net settled the derivatives and therefore the previously deferred gains recorded in other comprehensive income will be released to interest expense over the life of the senior notes. The effect of these treasury locks reduced the effective interest rate on these notes by approximately 0.25%.  

Foreign Currency Forward Exchange Contracts

A number of our European subsidiaries are exposed to the impact of exchange rate volatility between the U.S. dollar and the subsidiaries’ functional currencies, being either the Euro or the British Pound sterling. We entered into contracts to exchange U.S. dollars for Euros and British Pound sterling through September 2022, which we account for as cash flow hedges. The aggregate notional amount of these contracts was $363.0 million and $426.9 million at June 30, 2020 and December 31, 2019, respectively.  The purpose of these contracts is to hedge a portion of the forecasted transactions of our European subsidiaries under long-term sales contracts with certain customers. These contracts are expected to provide us with a more balanced matching of future cash receipts and expenditures by currency, thereby reducing our exposure to fluctuations in currency exchange rates.  The effective portion of the hedges, gains of $2.8 million and losses of $14.5 million, were recorded in other comprehensive income for the quarter and six months ended June 30, 2020 and losses of $5.2 million and $8.8 million for the quarter and six months ended June 30, 2019.  We classified $1.0 million of the carrying amount of these contracts as assets ($0.4 million of which was recorded in prepaid expenses and other current assets) and $17.3 million as liabilities ($3.6 million of which is recorded in non-current liabilities), on the condensed consolidated balance sheets at June 30, 2020, and $3.7 million of the carrying amount of these contracts was classified in assets ($1.3 million of which was recorded in prepaid expenses and other current assets) and $15.5 million as liabilities ($2.9 million of which is in other non-current liabilities) at December 31, 2019.  We recognized net losses of $5.7 million and $10.1 million in gross margin during the quarter and six months ended June 30, 2020, and net losses of $2.8 million and $4.6 million for the quarter and six months ended June 30, 2019.  

In addition, we enter into foreign exchange forward contracts which are not designated as hedges. These are used to provide an offset to transactional gains or losses arising from the re-measurement of non-functional monetary assets and liabilities such as accounts receivable. The change in the fair value of the derivatives is recorded in the statement of operations. There are no credit contingency features in these derivatives. During the quarters ended June 30, 2020 and 2019, we recognized net foreign exchange losses of $0.7 million and $0.9 million, respectively, in the condensed consolidated statements of operations. During the six months ended June 30, 2020 and 2019, we recognized net foreign exchange losses of $1.7 million and $0.6 million, respectively. The net

foreign exchange impact recognized from these hedges offsets the translation exposure of these transactions. The carrying amount of the contracts for derivatives not designated as hedging instruments was less than $0.1 million classified as current liabilities at June 30, 2020, and $0.6 million classified in prepaid expenses and other current assets and less than $0.1 million of current liabilities on our consolidated balance sheets at December 31, 2019, in the condensed consolidated balance sheets.

 The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and six months ended June 30, 2020 and June 30, 2019 was as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
Unrealized losses at beginning of period, net of tax	$	(18.7	)	$	(11.4	)	$	(8.4	)	$	(10.6	)
Losses reclassified to net sales		4.4			2.2			7.7			3.5
Increase (decrease) in fair value		2.0			(4.6	)		(11.6	)		(6.7	)
Unrealized losses at end of period, net of tax	$	(12.3	)	$	(13.8	)	$	(12.3	)	$	(13.8	)

Unrealized losses of $14.2 million recorded in accumulated other comprehensive loss, less taxes of $3.4 million, as of June 30, 2020, are expected to be reclassified into earnings over the next twelve months as the hedged sales are recorded.

Commodity Swap Agreements

On occasion we enter into commodity swap agreements to hedge against price fluctuations of raw materials, including propylene (the principal component of acrylonitrile).  As of June 30, 2020, we had commodity swap agreements with a notional value of $15.1 million. The swaps mature monthly through March 2022. The swaps are accounted for as a cash flow hedge of our forward raw material purchases. To ensure the swaps are highly effective, all of the critical terms of the swap matched the terms of the hedged items. The fair value of the commodity swap agreements was a liability of $6.2 million ($0.7 million of which was in other non-current liabilities) at June 30, 2020, and a liability of $5.4 million ($1.1 million of which was in other non-current liabilities) at December 31, 2019.

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 7 — Income Taxes

The tax provision, a benefit of $3.6 million for the current quarter, included a $2.7 million benefit primarily for the release of reserves of unrecognized tax benefits as a result of tax audit settlements. The effective tax rate was 16.5% for the first half of 2020, compared to 22.8% for the first half of 2019. Excluding the $2.7 million benefit, the adjusted 2020 year-to-date tax rate would have been 21.9%. Our underlying estimated effective income tax rate is expected to remain at 23% for the year.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 8 — Fair Value Measurements

The authoritative guidance for fair value measurements establishes a hierarchy for observable and unobservable inputs used to measure fair value, into three broad levels, which are described below:

• Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

• Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

• Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value.

We have no assets or liabilities that utilize Level 1 inputs. However, we have derivative instruments classified as liabilities and assets which utilize Level 2 inputs, and one liability that utilizes Level 3 inputs.

For derivative assets and liabilities that utilize Level 2 inputs, we prepare estimates of future cash flows of our derivatives, which are discounted to a net present value. The estimated cash flows and the discount factors used in the valuation model are based on observable inputs, and incorporate non-performance risk (the credit standing of the counterparty when the derivative is in a net asset position, and the credit standing of Hexcel when the derivative is in a net liability position). The fair value of these assets and liabilities was $1.0 million and $23.5 million and $4.3 million and $21.7 million, respectively, at June 30, 2020 and December 31,

2019.  In addition, the fair value of these derivative contracts, which are subject to a master netting arrangement under certain circumstances, is presented on a gross basis in the condensed consolidated balance sheets.

Below is a summary of valuation techniques for all Level 2 financial assets and liabilities:

• Interest rate swaps — valued using LIBOR yield curves at the reporting date. The fair value of the liabilities were $0.6 million at December 31, 2019.  There were no interest rate swaps outstanding at June 30, 2020.

• Foreign exchange derivative assets and liabilities — valued using quoted forward prices at the reporting date. Fair value of assets and liabilities at June 30, 2020 was $1.0 million and $17.3 million, respectively. The fair value of assets and liabilities at December 31, 2019 was $4.3 million and $15.7 million, respectively. 

• Commodity raw materials — valued using quoted forward prices at the reporting date. Fair value of liabilities at June 30, 2020 and December 31, 2019 was $6.2 million and $5.4 million, respectively.

Counterparties to the above contracts are highly rated financial institutions, none of which experienced any significant downgrades in the six months ended June 30, 2020 that would reduce the receivable amount owed, if any, to the Company.

Liabilities classified as Level 3 — At June 30, 2020 we have a liability for $3.2 million, which represents contingent consideration that was recognized in connection with the Company’s Oxford Performance Materials, Inc. acquisition. This amount was estimated based on certain contractual stipulations which require payments to be made to the seller in the future based upon the achievement of certain results. We used forecasted results which were discounted using an internally derived discount rate. Future amounts payable may differ from this estimate by the difference between the actual and forecasted results. There were no payments and the amount of interest related to this liability accreted was not material during the six months ended June 30, 2020.  

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Revenue

6 Months Ended

Jun. 30, 2020

Revenue From Contract With Customer [Abstract]

Revenue

Note 9 — Revenue

Our revenue is primarily derived from the sale of inventory under long-term agreements with our customers. We have determined that individual purchase orders (“PO”), whose terms and conditions taken with a master agreement, create the ASC 606 contracts which are generally short-term in nature.  For those sales, which are not tied to a long-term agreement, we generate a PO that is subject to our standard terms and conditions. In instances where our customers acquire our goods related to government contracts, the contracts are typically subject to terms similar, or equal to, the Federal Acquisition Regulation Part 52.249-2.  This regulation contains a termination for convenience clause (“T for C”), which requires that the customer pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit.

We recognize revenue over time for those agreements that have T for C, and where the products being produced have no alternative use.  As our production cycle is typically six months or less, it is expected that goods related to the revenue recognized over time will be shipped and billed within the next twelve months. Less than half of our agreements contain provisions which would require revenue to be recognized over time.

We disaggregate our revenue based on market for analytical purposes. The following table details our revenue by market for the quarters and six months ended June 30, 2020 and 2019:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2020		2019		2020		2019
Consolidated Net Sales	$	378.7	$	609.0	$	919.7	$	1,218.9
Commercial Aerospace	203.9		416.5			566.8		832.0
Space & Defense		108.4		111.8		220.0		219.6
Industrial	66.4			80.7	132.9		167.3

Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled.  Contract assets are included in our condensed consolidated balance sheets as a component of current assets. The activity related to contract assets for the six months ended June 30, 2020 is as follows:

(In millions)	Composite Material			Engineered Products			Total
Balance at December 31, 2019	$	12.8		$	39.9		$	52.7
Net revenue billed		(1.4	)		4.6			3.2
Balance at March 31, 2020	$	11.4		$	44.5		$	55.9
Net revenue billed		0.5			(1.7	)		(1.2	)
Balance at June 30, 2020	$	11.9		$	42.8		$	54.7

Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional.  

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Segment Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Information

Note 10 — Segment Information

The financial results for our operating segments are prepared using a management approach, which is consistent with the basis and manner in which we internally segregate financial information for the purpose of assisting in making internal operating decisions. We evaluate the performance of our operating segments based on operating income, and generally account for intersegment sales based on arm’s length prices.  Corporate and certain other expenses are not allocated to the operating segments, except to the extent that the expense can be directly attributable to the business segment.

Financial information for our operating segments for the quarters and six months ended June 30, 2020 and 2019 were as follows:

	(Unaudited)
	Composite			Engineered			Corporate &
(In millions)	Materials			Products			Other (a)			Total
Second Quarter 2020
Net sales to external customers	$	306.2		$	72.5		$	—		$	378.7
Intersegment sales		15.4			0.4			(15.8	)		—
Total sales	$	321.6		$	72.9		$	(15.8	)	$	378.7
Other operating expense		8.5			2.4			2.2			13.1
Operating income (loss)		20.1			(0.5	)		(13.2	)		6.4
Depreciation and amortization		30.8			4.0			0.1			34.9
Stock-based compensation		(0.3	)		(0.1	)		(1.3	)		(1.7	)
Accrual basis additions to capital expenditures		10.5			1.0			—			11.5
Second Quarter 2019
Net sales to external customers	$	484.0		$	125.0		$	—		$	609.0
Intersegment sales		21.5			—			(21.5	)		—
Total sales	$	505.5		$	125.0		$	(21.5	)	$	609.0
Operating income (loss)		111.8			16.3			(13.0	)		115.1
Depreciation and amortization		30.1			3.8			0.1			34.0
Stock-based compensation		1.1			0.4			0.9			2.4
Accrual basis additions to capital expenditures		49.0			1.1			—			50.1
Six Months Ended June 30, 2020
Net sales to external customers	$	744.7		$	175.0		$	—		$	919.7
Intersegment sales		40.2			0.9			(41.1	)		—
Total sales	$	784.9		$	175.9		$	(41.1	)	$	919.7
Other operating expense		9.1			2.7			16.0			27.8
Operating income (loss)		111.6			6.0			(45.5	)		72.1
Depreciation and amortization		62.6			7.7			0.1			70.4
Stock-based compensation		4.4			1.1			7.2			12.7
Accrual basis additions to capital expenditures		30.7			2.7			—			33.4
Six Months Ended June 30, 2019
Net sales to external customers	$	971.7		$	247.2		$	—		$	1,218.9
Intersegment sales		40.7			0.1			(40.8	)		—
Total sales	$	1,012.4		$	247.3		$	(40.8	)	$	1,218.9
Operating income (loss)		224.3			31.1			(37.5	)		217.9
Depreciation and amortization		65.0			7.6			0.1			72.7
Stock-based compensation		5.2			1.2			7.1			13.5
Accrual basis additions to capital expenditures		105.8			1.8			—			107.6

(a) We do not allocate corporate expenses to the operating segments.

Goodwill and Intangible Assets	Composite			Engineered
(In millions)	Materials			Products			Total
Balance at December 31, 2019	$	96.2		$	184.2		$	280.4
Amortization expense		(0.9	)		(2.5	)		(3.4	)
Currency translation adjustments		(1.4	)	—				(1.4	)
Balance at June 30, 2020	$	93.9		$	181.7		$	275.6

At June 30, 2020, the balance of goodwill and intangible assets was $188.9 million and $86.7 million, respectively. During the first half of 2020 the Company determined that the economic uncertainty caused by the COVID-19 pandemic was a trigger for an impairment review of goodwill. As a result of management’s review, we determined that it was not more likely than not that there was impairment.

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Accumulated Other Comprehensive Loss

Note 11 — Accumulated Other Comprehensive Loss

Comprehensive income represents net income and other gains and losses affecting stockholders’ equity that are not reflected in the condensed consolidated statements of operations. The components of accumulated other comprehensive loss as of June 30, 2020 and December 31, 2019 were as follows:

(In millions)	Unrecognized Net Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2019	$	(22.4	)	$	(6.9	)	$	(89.4	)	$	(118.7	)
Other comprehensive income (loss) before reclassifications		1.0			(14.5	)		(16.0	)		(29.5	)
Amounts reclassified from accumulated other comprehensive loss		(0.2	)		10.4		—				10.2
Other comprehensive income (loss)		0.8			(4.1	)		(16.0	)		(19.3	)
Balance at June 30, 2020	$	(21.6	)	$	(11.0	)	$	(105.4	)	$	(138.0	)

(1) Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

The amounts of net gains reclassified to earnings from the unrecognized net defined benefit and postretirement plan costs component of accumulated other comprehensive loss for the quarter and six months ended June 30, 2020, were $0.2 million less taxes of $0.1 million, and $0.4 million less taxes of $0.2 million, respectively. The amounts reclassified to earnings from the change in fair value of the derivatives component of accumulated other comprehensive loss for the quarter and six months ended June 30, 2020 were net losses of $5.7 million less taxes of $1.3 million and $10.1 million less taxes of $2.4 million, for those related to foreign currency forward exchange contracts and $2.1 million less taxes of $0.5 million and $3.4 million less taxes of $0.8 million, related to commodity swaps. We also recorded net gains of $0.3 million with less taxes of $0.1 million and net losses of $0.1 million less taxes of less than $0.1 million related to interest rate derivatives, in the three and six month periods ended June 30, 2020, respectively. 

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 12 — Commitments and Contingencies

We are involved in litigation, investigations and claims arising out of the normal conduct of our business, including those relating to commercial transactions, environmental, employment and health and safety matters. While it is impossible to predict the ultimate resolution of litigation, investigations and claims asserted against us, we believe, based upon our examination of currently available information, our experience to date, and advice from legal counsel, that, after taking into account our existing insurance coverage and amounts already provided for, the currently pending legal proceedings against us will not have a material adverse impact on our consolidated results of operations, financial position or cash flows.

Environmental Matters

We have been named as a potentially responsible party (“PRP”) with respect to the below hazardous waste disposal sites that we do not own or possess, which are included on, or proposed to be included on, the Superfund National Priority List of the U.S. Environmental Protection Agency (“EPA”) or on equivalent lists of various state governments. Because the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) allows for joint and several liability in certain circumstances, we could be responsible for all remediation costs at such sites, even if we are one of many PRPs. We believe, based on the amount and nature of our waste, and the number of other financially viable PRPs, that our liability in connection with such environmental matters will not be material.

Lower Passaic River Study Area

Hexcel together with approximately 48 other PRPs that comprise the Lower Passaic Cooperating Parties Group (the “CPG”), are subject to a May 2007 Administrative Order on Consent (“AOC”) with the EPA requiring the CPG to perform a Remedial Investigation/Feasibility Study of environmental conditions of a 17-mile stretch of the Passaic River in New Jersey (the “Lower Passaic River”). We were included in the CPG based on our operations at our former manufacturing site in Lodi, New Jersey.        

In March 2016, the EPA issued a Record of Decision (“ROD”) setting forth the EPA’s selected remedy for the lower eight miles of the Lower Passaic River at an expected cost ranging from $0.97 billion to $2.07 billion. This estimate does not include any costs related to a future remedy for the upper nine miles of the Lower Passaic River. In August 2017, the EPA appointed an independent third party allocation expert to make recommendations on the relative liability of approximately 120 identified non-government PRP’s.  The allocation is expected to be completed by the end of 2020.

In October 2016, pursuant to a settlement agreement with the EPA, Occidental Chemical Corporation (“OCC”), one of the PRPs, commenced performance of the remedial design required by the ROD, reserving its right of cost contribution from all other PRPs. In June 2018, OCC filed suit against approximately 120 parties, including Hexcel, in the U.S. District Court of the District of New Jersey seeking cost recovery and contribution under CERCLA related to the Lower Passaic River. In July 2019, the court granted in part and denied in part the defendants’ motion to dismiss.  Discovery for the remaining claims is ongoing. We do not know whether this litigation will impact the EPA’s allocation process or the ultimate outcome of the matter.

The accrual was approximately $2.0 million as of June 30, 2020 and December 31, 2019. Given the uncertainty associated with the many elements of the Superfund process for the Lower Passaic River, the amounts accrued may not be indicative of the amounts for which we will ultimately be responsible.

Omega Chemical Corporation Superfund Site, Whittier, California

We are a PRP at a former chemical waste site in Whittier, California. The PRPs at Omega have established The Omega Chemical Site PRP Organized Group, (the “OPOG”), and are currently investigating and remediating soil and groundwater at the site pursuant to a Consent Decree with the EPA. The OPOG has attributed to Hexcel either 1.2% or 2.18% of the waste tonnage (dependent on the specific location within the Omega Chemical Site) sent to the site.  In addition to the Omega site specifically, the EPA is investigating the scope of regional groundwater contamination in the vicinity of the Omega site and issued a ROD. The OPOG members have been served notice by the EPA as PRPs who will be required to be involved in the remediation of the regional groundwater contamination in that vicinity as well.  As a member of the OPOG, Hexcel will incur costs associated with the investigation and remediation of the Omega site and the regional groundwater remedy, although our ultimate liability, if any, in connection with this matter cannot be determined at this time. The total accrued liability relating to potential liability for both the Omega site and regional groundwater remedies was $0.3 million at June 30, 2020 and at December 31, 2019.

Summary of Environmental Reserves

Our estimate of liability as a PRP and our remaining costs associated with our responsibility to remediate the Lower Passaic River and other sites are accrued in the condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, our aggregate environmental related accruals were $2.6 million and $2.5 million, respectively, of which $0.7 million and $0.6 million, respectively, was included in current other accrued liabilities with the remainder included in other non-current liabilities.  As related to certain environmental matters the accrual was estimated at the low end of a range of possible outcomes since no amount within the range is a better estimate than any other amount.  If we had accrued, for those sites where we are able to estimate our liability, at the high end of the range of possible outcomes, our accrual would have been $16 million higher at June 30, 2020 and December 31, 2019.

These accruals can change significantly from period to period due to such factors as additional information on the nature or extent of contamination, the methods of remediation required, changes in the apportionment of costs among responsible parties and other actions by governmental agencies or private parties, or the impact, if any, of being named in a new matter.

Product Warranty

We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the six months ended June 30, 2020, and accrued warranty cost, included in “other accrued liabilities” in the condensed consolidated balance sheets at June 30, 2020 and December 31, 2019, were as follows:

	Product
(In millions)	Warranties
Balance as of December 31, 2019	$	5.5
Warranty expense		1.3
Deductions and other		(2.3	)
Balance as of March 31, 2020	$	4.5
Warranty expense		—
Deductions and other		(1.5	)
Balance as of June 30, 2020	$	3.0

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Other Operating Expense

6 Months Ended

Jun. 30, 2020

Other Income And Expenses [Abstract]

Other Operating Expense

Note 13 — Other Operating Expense

In the second quarter of 2020, we took several cost reduction measures including eliminating approximately 30% of our labor costs through temporary salary reductions, unpaid furloughs and the elimination of over 1,500 jobs. We took a restructuring charge of $13.1 million in the second quarter primarily related to the job reductions. In the six months ended 2020, other operating expense of $27.8 million also included costs related to the terminated merger agreement with Woodward.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared from the unaudited accounting records of Hexcel pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  Certain information and footnote disclosures normally included in financial statements have been omitted pursuant to rules and regulations of the SEC. In the opinion of management, the condensed consolidated financial statements include all normal recurring adjustments as well as any non-recurring adjustments necessary to present fairly the statement of financial position, results of operations, cash flows and statement of stockholder’s equity for the interim periods presented.  The condensed consolidated balance sheet as of December 31, 2019 was derived from the audited 2019 consolidated balance sheet.  Interim results are not necessarily indicative of results expected for any other interim period or for the full year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2019 Annual Report on Form 10-K.

Investments in Affiliated Companies

Investments in Affiliated Companies

We have a 50% equity investment in Aerospace Composites Malaysia Sdn. Bhd. and a 25% equity investment in HexCut Services SAS.  These investments are accounted for using the equity method of accounting.      

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The Accounting Standards Codification 326, Financial Instruments- Credit Losses (“ASC 326”) requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. We adopted the update, effective January 1, 2020, applying this standard to our Accounts Receivable and Contract Assets. Our high-quality credit review practice and good customer relationships has resulted in accounts receivable write offs below 0.5% of our annual sales. Due to the requirements of ASC 326, we have reviewed and refined our bad debt reserve process. Management reviews the average annual charge-off rate along with an assessment of current micro and macro-economic factors to determine any required reserves. If at any time management finds that there are significant changes to any of these contributing factors, the reserve will be adjusted accordingly. In the six months ended June 30, 2020 we recorded $0.2 million of reserves and there were no write-offs against receivables resulting in a reserve balance of $0.8 million at June 30, 2020.

In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), which amends the current disclosure requirements regarding defined benefit pensions and other post retirement plans, and allows for the removal of certain disclosures, while adding certain new disclosure requirements. This standard is effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We do not expect this new standard to have a significant impact to our disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which amends and aims to simplify accounting disclosure requirements regarding a number of topics including: intraperiod tax allocation, accounting for deferred taxes when there are changes in consolidation of certain investments, tax basis step up in an acquisition and the application of effective rate changes during interim periods, amongst other improvements. This standard is

effective for fiscal years beginning after December 15, 2020 and allows for early adoption. We are assessing the impact of this new standard on our consolidated balance sheets, statements of operations and our future disclosures. 

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Net Income (Loss) Per Common Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Summary of Earnings Per Share Basic and Diluted

	Quarter Ended June 30,					Six Months Ended June 30,
(In millions, except per share data)	2020			2019		2020		2019
Basic net income (loss) per common share:
Net income (loss)	$	(1.0	)	$	80.9	$	41.4	$	153.1
Weighted average common shares outstanding		83.7			85.2		83.7		85.1
Basic net income (loss) per common share	$	(0.01	)	$	0.95	$	0.49	$	1.80
Diluted net income (loss) per common share:
Net income (loss)		(1.0	)		80.9		41.4		153.1
Weighted average common shares outstanding — Basic		83.7			85.2		83.7		85.1
Plus incremental shares from assumed conversions:
Restricted stock units		—			0.4		0.2		0.4
Stock options		—			0.6		0.2		0.6
Weighted average common shares outstanding — Dilutive (1)		83.7			86.2		84.1		86.1
Diluted net (loss) income per common share (1)	$	(0.01	)	$	0.94	$	0.49	$	1.78

(1) For the quarter ended June 30, 2020, the dilutive impact of outstanding options and restricted stock units was excluded from the dilutive share count as a result of the Company’s net loss for the period.

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Inventories (Tables)

6 Months Ended

Jun. 30, 2020

Inventory Disclosure [Abstract]

Schedule of Inventories

(In millions)	June 30, 2020		December 31, 2019
Raw materials	$	165.0	$	154.9
Work in progress		30.0		40.9
Finished goods		121.6		137.3
Total Inventory	$	316.6	$	333.1

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Retirement and Other Postretirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2020

Defined Benefit Retirement Plans

Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of Net Periodic Benefit Costs of Defined Benefit Retirement Plans

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
European Defined Benefit Retirement Plans
Service cost	$	0.3		$	0.2		$	0.5		$	0.5
Interest cost		0.8			1.1			1.7			2.2
Expected return on plan assets		(1.7	)		(2.2	)		(3.4	)		(4.4	)
Net amortization and deferral		0.1			0.1			0.2			0.2
Net periodic benefit credit	$	(0.5	)	$	(0.8	)	$	(1.0	)	$	(1.5	)

Schedule of Amounts Recognized on Balance Sheet

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet for European defined benefit retirement plans:
Other assets	$	45.7	$	45.2
Accrued liabilities		1.7		0.6
Other non-current liabilities		19.3		18.9
Total accrued benefit	$	21.0	$	19.5

Defined Benefit Retirement Plans | Non-qualified

Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of Net Periodic Benefit Costs of Defined Benefit Retirement Plans

Net periodic benefit costs of our defined benefit retirement plans for the quarter and six months ended June 30, 2020 and 2019 were as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2020		2019		2020		2019
U.S. Nonqualified Defined Benefit Retirement Plans
Service cost	$	0.3	$	0.3	$	0.6	$	0.6
Interest cost		0.1		0.1		0.2		0.3
Net amortization		0.1	—			0.2	—
Net periodic benefit cost	$	0.5	$	0.4	$	1.0	$	0.9

Schedule of Amounts Recognized on Balance Sheet

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet for U.S. nonqualified defined benefit retirement plans:
Accrued liabilities	$	1.3	$	1.4
Other non-current liabilities		19.4		18.9
Total accrued benefit	$	20.7	$	20.3

Postretirement Health Care and Life Insurance Benefit Plans

Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of Amounts Recognized on Balance Sheet

Net periodic benefit costs of our postretirement health care and life insurance benefit plans for the quarter and six months ended June 30, 2020 and 2019 were immaterial.

(In millions)	June 30, 2020		December 31, 2019
Amounts recognized on the balance sheet:
Accrued liabilities	$	0.5	$	0.5
Other non-current liabilities	2.6		2.6
Total accrued benefit	$	3.1	$	3.1

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Debt (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Schedule of Debt and Capital Lease Obligations

(In millions)	June 30, 2020			December 31, 2019
Current portion of finance lease	$	0.5		$	0.6
Current portion of Euro term loan		—			8.9
Current portion of debt		0.5			9.5
Non-current portion of Euro term loan		—			41.5
Senior unsecured credit facility		568.0			313.0
4.7% senior notes --- due 2025		300.0			300.0
3.95% senior notes --- due 2027		400.0			400.0
Senior notes --- original issue discount		(1.6	)		(1.7	)
Senior notes --- deferred financing costs		(3.8	)		(4.2	)
Non-current portion of finance lease and other debt		2.1			2.0
Long-term debt		1,264.7			1,050.6
Total debt	$	1,265.2		$	1,060.1

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Change in Fair Value of Foreign Currency Forward Exchange Contracts Under Hedge Designations

 The change in fair value of our foreign currency forward exchange contracts under hedge designations recorded net of tax within accumulated other comprehensive income for the quarters and six months ended June 30, 2020 and June 30, 2019 was as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
Unrealized losses at beginning of period, net of tax	$	(18.7	)	$	(11.4	)	$	(8.4	)	$	(10.6	)
Losses reclassified to net sales		4.4			2.2			7.7			3.5
Increase (decrease) in fair value		2.0			(4.6	)		(11.6	)		(6.7	)
Unrealized losses at end of period, net of tax	$	(12.3	)	$	(13.8	)	$	(12.3	)	$	(13.8	)

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Revenue (Tables)

6 Months Ended

Jun. 30, 2020

Revenue From Contract With Customer [Abstract]

Schedule of Revenue By Market

The following table details our revenue by market for the quarters and six months ended June 30, 2020 and 2019:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	2020		2019		2020		2019
Consolidated Net Sales	$	378.7	$	609.0	$	919.7	$	1,218.9
Commercial Aerospace	203.9		416.5			566.8		832.0
Space & Defense		108.4		111.8		220.0		219.6
Industrial	66.4			80.7	132.9		167.3

Schedule of Activity Related to Contract Assets

The activity related to contract assets for the six months ended June 30, 2020 is as follows:

(In millions)	Composite Material			Engineered Products			Total
Balance at December 31, 2019	$	12.8		$	39.9		$	52.7
Net revenue billed		(1.4	)		4.6			3.2
Balance at March 31, 2020	$	11.4		$	44.5		$	55.9
Net revenue billed		0.5			(1.7	)		(1.2	)
Balance at June 30, 2020	$	11.9		$	42.8		$	54.7

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Schedule of Operating Segment Reporting Information

Financial information for our operating segments for the quarters and six months ended June 30, 2020 and 2019 were as follows:

	(Unaudited)
	Composite			Engineered			Corporate &
(In millions)	Materials			Products			Other (a)			Total
Second Quarter 2020
Net sales to external customers	$	306.2		$	72.5		$	—		$	378.7
Intersegment sales		15.4			0.4			(15.8	)		—
Total sales	$	321.6		$	72.9		$	(15.8	)	$	378.7
Other operating expense		8.5			2.4			2.2			13.1
Operating income (loss)		20.1			(0.5	)		(13.2	)		6.4
Depreciation and amortization		30.8			4.0			0.1			34.9
Stock-based compensation		(0.3	)		(0.1	)		(1.3	)		(1.7	)
Accrual basis additions to capital expenditures		10.5			1.0			—			11.5
Second Quarter 2019
Net sales to external customers	$	484.0		$	125.0		$	—		$	609.0
Intersegment sales		21.5			—			(21.5	)		—
Total sales	$	505.5		$	125.0		$	(21.5	)	$	609.0
Operating income (loss)		111.8			16.3			(13.0	)		115.1
Depreciation and amortization		30.1			3.8			0.1			34.0
Stock-based compensation		1.1			0.4			0.9			2.4
Accrual basis additions to capital expenditures		49.0			1.1			—			50.1
Six Months Ended June 30, 2020
Net sales to external customers	$	744.7		$	175.0		$	—		$	919.7
Intersegment sales		40.2			0.9			(41.1	)		—
Total sales	$	784.9		$	175.9		$	(41.1	)	$	919.7
Other operating expense		9.1			2.7			16.0			27.8
Operating income (loss)		111.6			6.0			(45.5	)		72.1
Depreciation and amortization		62.6			7.7			0.1			70.4
Stock-based compensation		4.4			1.1			7.2			12.7
Accrual basis additions to capital expenditures		30.7			2.7			—			33.4
Six Months Ended June 30, 2019
Net sales to external customers	$	971.7		$	247.2		$	—		$	1,218.9
Intersegment sales		40.7			0.1			(40.8	)		—
Total sales	$	1,012.4		$	247.3		$	(40.8	)	$	1,218.9
Operating income (loss)		224.3			31.1			(37.5	)		217.9
Depreciation and amortization		65.0			7.6			0.1			72.7
Stock-based compensation		5.2			1.2			7.1			13.5
Accrual basis additions to capital expenditures		105.8			1.8			—			107.6

(a) We do not allocate corporate expenses to the operating segments.

Schedule of Goodwill and Intangible Assets by Segment

Goodwill and Intangible Assets	Composite			Engineered
(In millions)	Materials			Products			Total
Balance at December 31, 2019	$	96.2		$	184.2		$	280.4
Amortization expense		(0.9	)		(2.5	)		(3.4	)
Currency translation adjustments		(1.4	)	—				(1.4	)
Balance at June 30, 2020	$	93.9		$	181.7		$	275.6

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Schedule of Components of Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss as of June 30, 2020 and December 31, 2019 were as follows:

(In millions)	Unrecognized Net Defined Benefit and Postretirement Plan Costs			Change in Fair Value of Derivatives Products (1)			Foreign Currency Translation			Total
Balance at December 31, 2019	$	(22.4	)	$	(6.9	)	$	(89.4	)	$	(118.7	)
Other comprehensive income (loss) before reclassifications		1.0			(14.5	)		(16.0	)		(29.5	)
Amounts reclassified from accumulated other comprehensive loss		(0.2	)		10.4		—				10.2
Other comprehensive income (loss)		0.8			(4.1	)		(16.0	)		(19.3	)
Balance at June 30, 2020	$	(21.6	)	$	(11.0	)	$	(105.4	)	$	(138.0	)

(1) Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Schedule of Product Warranty

We provide standard assurance-type warranties for our products, which cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Warranty expense for the six months ended June 30, 2020, and accrued warranty cost, included in “other accrued liabilities” in the condensed consolidated balance sheets at June 30, 2020 and December 31, 2019, were as follows:

	Product
(In millions)	Warranties
Balance as of December 31, 2019	$	5.5
Warranty expense		1.3
Deductions and other		(2.3	)
Balance as of March 31, 2020	$	4.5
Warranty expense		—
Deductions and other		(1.5	)
Balance as of June 30, 2020	$	3.0

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Significant Accounting Policies - Additional Information (Details) - USD ($)		6 Months Ended
	Jan. 01, 2020	Jun. 30, 2020
Accounting Standards Update 2016-13
Significant Accounting Policies [Line Items]
Reserves accounts receivable		$ 200,000
Write-off against accounts receivables		0
Reserve accounts receivable, balance		$ 800,000
Maximum | Accounting Standards Update 2016-13
Significant Accounting Policies [Line Items]
Percentage of accounts receivable write offs	0.50%
Aerospace Composites Malaysia Sdn. Bhd.
Significant Accounting Policies [Line Items]
Interest in affiliated company, accounted for using equity method of accounting (as a percent)		50.00%
HexCut Services SAS
Significant Accounting Policies [Line Items]
Interest in affiliated company, accounted for using equity method of accounting (as a percent)		25.00%

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Net Income (Loss) Per Common Share - Summary of Earnings Per Share Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended				6 Months Ended
		Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Basic net income (loss) per common share:
Net income (loss)		$ (1.0)	$ 42.4	$ 80.9	$ 72.2	$ 41.4	$ 153.1
Weighted average common shares outstanding - Basic (in shares)		83.7		85.2		83.7	85.1
Basic net income (loss) per common share		$ (0.01)		$ 0.95		$ 0.49	$ 1.80
Diluted net income (loss) per common share:
Net income (loss)		$ (1.0)		$ 80.9		$ 41.4	$ 153.1
Weighted average common shares outstanding - Basic (in shares)		83.7		85.2		83.7	85.1
Plus incremental shares from assumed conversions:
Weighted average common shares outstanding - Dilutive (in shares)	[1]	83.7		86.2		84.1	86.1
Diluted net (loss) income per common share	[1]	$ (0.01)		$ 0.94		$ 0.49	$ 1.78
Restricted Stock Units
Plus incremental shares from assumed conversions:
Incremental shares from assumed conversions				0.4		0.2	0.4
Stock Options
Plus incremental shares from assumed conversions:
Incremental shares from assumed conversions				0.6		0.2	0.6

[1] For the quarter ended June 30, 2020, the dilutive impact of outstanding options and restricted stock units was excluded from the dilutive share count as a result of the Company’s net loss for the period.

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Net Income (Loss) Per Common Share - Additional Information (Details) - $ / shares		3 Months Ended	6 Months Ended
	Apr. 06, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Anti-dilutive securities excluded from computation of earnings per share amount (in shares)		100,000	800,000	200,000
Dividend Declared
Earnings Per Share [Line Items]
Dividends payable, date declared	Apr. 06, 2020
Number of preferred share purchase right declared as divided per common stock	1
Dividends payable,record date	Apr. 16, 2020
Maximum percentage of common stock acquisition allowed by board of directors under rights plan	15.00%
Number of days after public announcement rights exercisable for acquiring person	10 days
Rights expiration date	Apr. 06, 2021
Dividend Declared | Series A Junior Participating Preferred Stock
Earnings Per Share [Line Items]
Exercise price of rights	$ 150.00

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Inventories - Schedule of Inventories (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 165.0	$ 154.9
Work in progress	30.0	40.9
Finished goods	121.6	137.3
Total Inventory	$ 316.6	$ 333.1

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Retirement and Other Postretirement Benefit Plans - Schedule of Net Periodic Benefit Costs of Defined Benefit Retirement Plans (Details) - Defined Benefit Retirement Plans - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
U.S.
Net periodic benefit costs of defined benefit retirement plans
Service cost	$ 0.3	$ 0.3	$ 0.6	$ 0.6
Interest cost	0.1	0.1	0.2	0.3
Net amortization and deferral	0.1		0.2
Net periodic benefit (credit) cost	$ 0.5	$ 0.4	$ 1.0	$ 0.9
Defined Benefit Plan, Tax Status [Extensible List]	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember
European
Net periodic benefit costs of defined benefit retirement plans
Service cost	$ 0.3	$ 0.2	$ 0.5	$ 0.5
Interest cost	0.8	1.1	1.7	2.2
Expected return on plan assets	(1.7)	(2.2)	(3.4)	(4.4)
Net amortization and deferral	0.1	0.1	0.2	0.2
Net periodic benefit (credit) cost	$ (0.5)	$ (0.8)	$ (1.0)	$ (1.5)

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Retirement and Other Postretirement Benefit Plans - Schedule of Amounts Recognized on Balance Sheet (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019
Amounts recognized on the balance sheet:
Other non-current liabilities	$ 54.1	$ 53.3
Defined Benefit Retirement Plans | U.S.
Amounts recognized on the balance sheet:
Accrued liabilities	1.3	1.4
Other non-current liabilities	19.4	18.9
Total accrued benefit	$ 20.7	$ 20.3
Defined Benefit Plan, Tax Status [Extensible List]	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember
Defined Benefit Retirement Plans | European
Amounts recognized on the balance sheet:
Other assets	$ 45.7	$ 45.2
Accrued liabilities	1.7	0.6
Other non-current liabilities	19.3	18.9
Total accrued benefit	21.0	19.5
Postretirement Health Care and Life Insurance Benefit Plans
Amounts recognized on the balance sheet:
Accrued liabilities	0.5	0.5
Other non-current liabilities	2.6	2.6
Total accrued benefit	$ 3.1	$ 3.1

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Retirement and Other Postretirement Benefit Plans - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Defined Benefit Retirement Plans
Amounts recognized on the balance sheet:
Amounts unrelated to service costs, benefit	$ 600,000	$ 900,000	$ 1,100,000	$ 1,700,000
Defined Benefit Retirement Plans | U.S.
Amounts recognized on the balance sheet:
Employer contribution to defined benefit retirement plans			300,000	$ 300,000
Expected employer contribution in full current year	1,400,000		1,400,000
Net amortization gain deferral	$ (100,000)		$ (200,000)
Defined Benefit Plan, Tax Status [Extensible List]	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember	us-gaap:NonqualifiedPlanMember
Defined Benefit Retirement Plans | European
Amounts recognized on the balance sheet:
Employer contribution to defined benefit retirement plans			$ 1,900,000	$ 2,300,000
Expected employer contribution in full current year	$ 5,000,000.0		5,000,000.0
Net amortization gain deferral	(100,000)	$ (100,000)	(200,000)	(200,000)
Postretirement Health Care and Life Insurance Benefit Plans
Amounts recognized on the balance sheet:
Net amortization gain deferral	200,000	$ 200,000	500,000	$ 500,000
Postretirement Health Care and Life Insurance Benefit Plans | Maximum
Amounts recognized on the balance sheet:
Expected employer contribution in full current year	$ 500,000		$ 500,000

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Debt - Schedule of Debt and Capital Lease Obligations (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Current portion of finance lease	$ 0.5	$ 0.6
Current portion of Euro term loan		8.9
Current portion of debt	0.5	9.5
Non-current portion of Euro term loan		41.5
Long-term debt	1,264.7	1,050.6
Non-current portion of finance lease and other debt	2.1	2.0
Total debt	1,265.2	1,060.1
Senior unsecured credit facility
Debt Instrument [Line Items]
Long-term debt	568.0	313.0
4.7% senior notes due 2025
Debt Instrument [Line Items]
Senior notes	300.0	300.0
4.7% senior notes due 2025 and 3.95% senior notes due 2027
Debt Instrument [Line Items]
Senior notes --- original issue discount	(1.6)	(1.7)
Senior notes --- deferred financing costs	(3.8)	(4.2)
3.95% senior notes due 2027
Debt Instrument [Line Items]
Senior notes	$ 400.0	$ 400.0

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Debt - Schedule of Debt and Capital Lease Obligations (Parenthetical) (Details)	6 Months Ended
	Jun. 30, 2020
4.7% senior notes due 2025
Debt Instrument [Line Items]
Debt instrument, interest rate	4.70%
Debt instrument, maturity year	2025
3.95% senior notes due 2027
Debt Instrument [Line Items]
Debt instrument, interest rate	3.95%
Debt instrument, maturity year	2027

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Debt - Additional Information (Details) - USD ($) $ in Millions	1 Months Ended		3 Months Ended	6 Months Ended		12 Months Ended
	Jan. 31, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2017	Dec. 31, 2015	Dec. 31, 2019	May 31, 2019
Debt Instrument [Line Items]
Borrowings			$ 1,264.7	$ 1,264.7				$ 1,050.6
Repayment and termination of Euro term loan				$ 49.9	$ 9.0
Term Loan
Debt Instrument [Line Items]
Repayment and termination of Euro term loan	$ 49.9
Maximum
Debt Instrument [Line Items]
Interest coverage ratio required to be maintained				375.00%
Minimum
Debt Instrument [Line Items]
Interest coverage ratio required to be maintained				350.00%
Senior unsecured credit facility- revolving loan due 2021 | Maximum
Debt Instrument [Line Items]
Maximum borrowing capacity									$ 700.0
Senior unsecured credit facility- revolving loan due 2024
Debt Instrument [Line Items]
Debt instrument expiration period		2024-06
Debt instrument, interest rate terms				The interest rate ranges from LIBOR + 0.875% to a maximum of LIBOR + 1.50%, depending upon the better of the Company’s leverage ratio or the credit rating. During the second quarter of 2020 the interest rate for the Facility increased to LIBOR + 1.125%, reflecting a change in the leverage ratio.
Credit facility interest rate basis			LIBOR + 1.125%
Spread on variable interest rate basis			1.125%
Maximum amount available under credit facility agreement to issue letters of credit			$ 50.0	$ 50.0
Letters of credit issued under credit facility				0.0
Undrawn availability under credit facility			432.0	$ 432.0
Weighted average interest rate				1.98%
Debt instrument, covenant terms				As defined in the Facility agreement, we are required to maintain a minimum interest coverage ratio of 3.50 (based on the ratio of EBITDA to interest expense) and may not exceed a maximum leverage ratio of 3.75 (based on the ratio of total debt to EBITDA) with a step up to 4.25 allowed following certain acquisitions.
Senior unsecured credit facility- revolving loan due 2024 | Level 2
Debt Instrument [Line Items]
Borrowings			$ 568.0	$ 568.0
Senior unsecured credit facility- revolving loan due 2024 | Maximum
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 1,000.0			$ 1,000.0
Credit facility interest rate basis		LIBOR + 1.50%
Spread on variable interest rate basis		1.50%
Debt instrument covenant increase in interest coverage ratio				425.00%
Senior unsecured credit facility- revolving loan due 2024 | Minimum
Debt Instrument [Line Items]
Credit facility interest rate basis		LIBOR + 0.875%
Spread on variable interest rate basis		0.875%
3.95% senior unsecured notes due 2027
Debt Instrument [Line Items]
Face value						$ 400.0
Debt instrument, interest rate			3.95%	3.95%		3.95%
Debt instrument, maturity year						2027
Increase in senior notes interest rate						0.25%
Effective interest rate			3.87%	3.87%
3.95% senior unsecured notes due 2027 | Treasury Lock | Interest Lock Agreement
Debt Instrument [Line Items]
Percentage of effective interest rate benefit				0.25%
3.95% senior unsecured notes due 2027 | Level 2
Debt Instrument [Line Items]
Fair value of senior unsecured notes			$ 427.7	$ 427.7
3.95% senior unsecured notes due 2027 | Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate						5.95%
4.7% senior unsecured notes due 2025
Debt Instrument [Line Items]
Face value							$ 300.0
Debt instrument, interest rate							4.70%
Debt instrument, maturity year							2025
Increase in senior notes interest rate							0.25%
Effective interest rate			4.83%	4.83%
4.7% senior unsecured notes due 2025 | Level 2
Debt Instrument [Line Items]
Fair value of senior unsecured notes			$ 326.7	$ 326.7
4.7% senior unsecured notes due 2025 | Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate							6.70%

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Derivative Financial Instruments - Additional Information (Details) € in Millions	1 Months Ended		3 Months Ended		6 Months Ended
	Jan. 31, 2020 USD ($)	Jan. 31, 2020 EUR (€)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) item	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2017
Derivative [Line Items]
Derivative cost of hedge	$ 700,000
Foreign currency unrealized losses expected to be reclassified into earnings over next twelve months			$ (14,200,000)		$ (14,200,000)
Foreign currency unrealized gains expected to be reclassified into earnings over next twelve months, taxes			$ 3,400,000		$ 3,400,000
3.95% senior unsecured notes due 2027
Derivative [Line Items]
Debt instrument, interest rate			3.95%		3.95%			3.95%
Interest Rate Swap Agreements
Derivative [Line Items]
Derivative fixed interest rate (as a percent)	0.50%	0.50%
Interest Rate Swap Agreements | Designated as Hedging Instrument
Derivative [Line Items]
Termination of derivative instruments | €		€ 45
Treasury Lock | Interest Lock Agreement | 3.95% senior unsecured notes due 2027
Derivative [Line Items]
Percentage of reduction in effective interest rate on senior notes					0.25%
Foreign Currency Forward Exchange Contracts
Derivative [Line Items]
Number of credit contingency features | item					0
Foreign Currency Forward Exchange Contracts | Cash Flow Hedging
Derivative [Line Items]
Gains (losses) in other comprehensive income, effective portion			$ 2,800,000	$ (5,200,000)	$ (14,500,000)	$ (8,800,000)
Foreign Currency Forward Exchange Contracts | Designated as Hedging Instrument
Derivative [Line Items]
Notional amount			363,000,000.0		363,000,000.0		$ 426,900,000
Carrying value / fair value of derivative assets			1,000,000.0		1,000,000.0		3,700,000
Carrying value / fair value of derivative assets included in prepaid expenses and other current assets			400,000		400,000		1,300,000
Carrying value / fair value of derivative liabilities			17,300,000		17,300,000		15,500,000
Carrying value / fair value of derivative liabilities included in non-current liabilities			3,600,000		3,600,000		2,900,000
Foreign Currency Forward Exchange Contracts | Designated as Hedging Instrument | Cash Flow Hedging
Derivative [Line Items]
Net gain (loss) recognized in gross margin			(5,700,000)	(2,800,000)	(10,100,000)	(4,600,000)
Foreign Currency Forward Exchange Contracts | Not Designated as Hedging Instrument
Derivative [Line Items]
Carrying value / fair value of derivative liabilities			100,000		100,000		100,000
Foreign exchange net losses on derivative contracts not designated as hedges			700,000	$ 900,000	1,700,000	$ 600,000
Carrying value / fair value of derivative assets included in prepaid expenses and other current assets							600,000
Commodity Swap Agreements
Derivative [Line Items]
Notional amount			15,100,000		15,100,000
Carrying value / fair value of derivative liabilities			6,200,000		6,200,000		5,400,000
Carrying value / fair value of derivative liabilities included in non-current liabilities			$ 700,000		$ 700,000		$ 1,100,000

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Derivative Financial Instruments - Schedule of Change in Fair Value of Foreign Currency Forward Exchange Contracts Under Hedge Designations (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Derivative [Line Items]
Balance		$ 1,421.1	$ 1,372.4	$ 1,446.1	$ 1,322.0
Balance		1,436.9	1,442.4	1,436.9	1,442.4
Designated as Hedging Instrument
Derivative [Line Items]
Balance	[1]			(6.9)
Balance	[1]	(11.0)		(11.0)
Designated as Hedging Instrument | Foreign Currency Forward Exchange Contracts
Derivative [Line Items]
Balance		(18.7)	(11.4)	(8.4)	(10.6)
Losses reclassified to net sales		4.4	2.2	7.7	3.5
Increase (decrease) in fair value		2.0	(4.6)	(11.6)	(6.7)
Balance		$ (12.3)	$ (13.8)	$ (12.3)	$ (13.8)

[1] Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

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Income Taxes - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Tax Disclosure [Abstract]
Provision for (benefit from) income taxes	$ (3.6)	$ 23.6	$ 8.2	$ 44.2
Increase (decrease) due to tax audit settlements	$ (2.7)
Effective tax rate (as a percent)			16.50%	22.80%
Adjusted estimated effective tax rate			21.90%
Estimated effective income tax rate			23.00%

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Fair Value Measurements - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020 USD ($) item Liability	Dec. 31, 2019 USD ($)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Number of counterparties, which experienced significant downgrades | item	0
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets	$ 0
Liabilities	$ 0
Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value measurement with unobservable inputs reconciliation, number of liabilities | Liability	1
Level 3 | OPM, Inc. Acquisition
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Acquisition of fair value liabilities, contingent consideration	$ 3,200,000
Level 2 | Fair Value Measured on Recurring Basis
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative assets	1,000,000.0	$ 4,300,000
Derivative liabilities	23,500,000	21,700,000
Level 2 | Fair Value Measured on Recurring Basis | Interest Rate Swap Agreements
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative liabilities		$ 600,000
Derivative Liability, Measurement Input [Extensible List]		hxl:MeasurementInputLIBORYieldCurvesMember
Derivative liability outstanding	0
Level 2 | Fair Value Measured on Recurring Basis | Foreign Currency Forward Exchange Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative assets	$ 1,000,000.0	$ 4,300,000
Derivative Asset, Measurement Input [Extensible List]	hxl:MeasurementInputLIBORYieldCurvesMember
Derivative liabilities	$ 17,300,000	15,700,000
Derivative Liability, Measurement Input [Extensible List]	us-gaap:MeasurementInputQuotedPriceMember
Level 2 | Fair Value Measured on Recurring Basis | Commodity Swap Agreements
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative liabilities	$ 6,200,000	$ 5,400,000
Derivative Liability, Measurement Input [Extensible List]	us-gaap:MeasurementInputQuotedPriceMember

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Revenue - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020
Revenue From Contract With Customer [Abstract]
Revenue recognition, description of timing	As our production cycle is typically six months or less, it is expected that goods related to the revenue recognized over time will be shipped and billed within the next twelve months.

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Revenue - Schedule of Revenue by Market (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation Of Revenue [Line Items]
Consolidated Net Sales	$ 378.7	$ 609.0	$ 919.7	$ 1,218.9
Commercial Aerospace
Disaggregation Of Revenue [Line Items]
Consolidated Net Sales	203.9	416.5	566.8	832.0
Space & Defense
Disaggregation Of Revenue [Line Items]
Consolidated Net Sales	108.4	111.8	220.0	219.6
Industrial
Disaggregation Of Revenue [Line Items]
Consolidated Net Sales	$ 66.4	$ 80.7	$ 132.9	$ 167.3

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Revenue - Schedule of Activity Related to Contract Assets (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Mar. 31, 2020	Jun. 30, 2020
Change in Contract with Customer Asset [Line Items]
Beginning Balance	$ 52.7	$ 52.7
Net revenue billed	3.2	(1.2)
Ending Balance	55.9	54.7
Composite Materials
Change in Contract with Customer Asset [Line Items]
Beginning Balance	12.8	12.8
Net revenue billed	(1.4)	0.5
Ending Balance	11.4	11.9
Engineered Products
Change in Contract with Customer Asset [Line Items]
Beginning Balance	39.9	39.9
Net revenue billed	4.6	(1.7)
Ending Balance	$ 44.5	$ 42.8

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Segment Information - Schedule of Operating Segment Reporting Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting Information [Line Items]
Total sales	$ 378.7	$ 609.0	$ 919.7	$ 1,218.9
Other operating expense	13.1		27.8
Operating income (loss)	6.4	115.1	72.1	217.9
Depreciation and amortization	34.9	34.0	70.4	72.7
Stock-based compensation	(1.7)	2.4	12.7	13.5
Accrual basis additions to capital expenditures	11.5	50.1	33.4	107.6
Corporate & Other and Intersegment Elimination
Segment Reporting Information [Line Items]
Total sales	(15.8)	(21.5)	(41.1)	(40.8)
Other operating expense	2.2		16.0
Operating income (loss)	(13.2)	(13.0)	(45.5)	(37.5)
Depreciation and amortization	0.1	0.1	0.1	0.1
Stock-based compensation	(1.3)	0.9	7.2	7.1
Composite Materials
Segment Reporting Information [Line Items]
Total sales	306.2	484.0	744.7	971.7
Composite Materials | Intersegment Elimination
Segment Reporting Information [Line Items]
Total sales	15.4	21.5	40.2	40.7
Composite Materials | Operating Segments
Segment Reporting Information [Line Items]
Total sales	321.6	505.5	784.9	1,012.4
Other operating expense	8.5		9.1
Operating income (loss)	20.1	111.8	111.6	224.3
Depreciation and amortization	30.8	30.1	62.6	65.0
Stock-based compensation	(0.3)	1.1	4.4	5.2
Accrual basis additions to capital expenditures	10.5	49.0	30.7	105.8
Engineered Products
Segment Reporting Information [Line Items]
Total sales	72.5	125.0	175.0	247.2
Engineered Products | Intersegment Elimination
Segment Reporting Information [Line Items]
Total sales	0.4		0.9	0.1
Engineered Products | Operating Segments
Segment Reporting Information [Line Items]
Total sales	72.9	125.0	175.9	247.3
Other operating expense	2.4		2.7
Operating income (loss)	(0.5)	16.3	6.0	31.1
Depreciation and amortization	4.0	3.8	7.7	7.6
Stock-based compensation	(0.1)	0.4	1.1	1.2
Accrual basis additions to capital expenditures	$ 1.0	$ 1.1	$ 2.7	$ 1.8

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Segment Information - Schedule of Goodwill and Intangible Assets by Segment (Details) $ in Millions	6 Months Ended
	Jun. 30, 2020 USD ($)
Changes in the carrying amount of gross goodwill and other purchased intangibles
Balance at the beginning of the period	$ 280.4
Amortization expense	(3.4)
Currency translation adjustments	(1.4)
Balance at the end of the period	275.6
Composite Materials
Changes in the carrying amount of gross goodwill and other purchased intangibles
Balance at the beginning of the period	96.2
Amortization expense	(0.9)
Currency translation adjustments	(1.4)
Balance at the end of the period	93.9
Engineered Products
Changes in the carrying amount of gross goodwill and other purchased intangibles
Balance at the beginning of the period	184.2
Amortization expense	(2.5)
Balance at the end of the period	$ 181.7

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Segment Information - Additional Information (Details) $ in Millions	Jun. 30, 2020 USD ($)
Segment Reporting [Abstract]
Goodwill	$ 188.9
Intangible assets	$ 86.7

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Accumulated Other Comprehensive Loss - Schedule of Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions		3 Months Ended				6 Months Ended
		Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Accumulated Other Comprehensive Income Loss [Line Items]
Balance		$ 1,421.1	$ 1,446.1	$ 1,372.4	$ 1,322.0	$ 1,446.1	$ 1,322.0
Other comprehensive income (loss) before reclassifications						(29.5)
Amounts reclassified from accumulated other comprehensive loss						10.2
Total other comprehensive income (loss)		17.3	(36.6)	(4.2)	(5.9)	(19.3)	(10.1)
Balance		1,436.9	1,421.1	1,442.4	1,372.4	1,436.9	1,442.4
Unrecognized Defined Benefit and Postretirement Plan Costs
Accumulated Other Comprehensive Income Loss [Line Items]
Balance			(22.4)			(22.4)
Other comprehensive income (loss) before reclassifications						1.0
Amounts reclassified from accumulated other comprehensive loss						(0.2)
Total other comprehensive income (loss)						0.8
Balance		(21.6)				(21.6)
Change in Fair Value of Derivatives Products
Accumulated Other Comprehensive Income Loss [Line Items]
Balance	[1]		(6.9)			(6.9)
Other comprehensive income (loss) before reclassifications	[1]					(14.5)
Amounts reclassified from accumulated other comprehensive loss	[1]					10.4
Total other comprehensive income (loss)	[1]					(4.1)
Balance	[1]	(11.0)				(11.0)
Foreign Currency Translation
Accumulated Other Comprehensive Income Loss [Line Items]
Balance			(89.4)			(89.4)
Other comprehensive income (loss) before reclassifications						(16.0)
Total other comprehensive income (loss)						(16.0)
Balance		(105.4)				(105.4)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income Loss [Line Items]
Balance		(155.3)	(118.7)	(113.9)	(108.0)	(118.7)	(108.0)
Total other comprehensive income (loss)		17.3	(36.6)	(4.2)	(5.9)
Balance		$ (138.0)	$ (155.3)	$ (118.1)	$ (113.9)	$ (138.0)	$ (118.1)

[1] Includes forward foreign exchange contracts, interest rate derivatives and commodity swaps.

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Accumulated Other Comprehensive Loss - Additional Information (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020
Unrecognized Net Defined Plan Costs
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on unrecognized net defined benefit and postretirement plan costs, net gain	$ 200,000	$ 400,000
Reclassification adjustment from AOCI on unrecognized net defined benefit and postretirement plan costs, tax	100,000	200,000
Change in Fair Value of Derivatives Products | Foreign Currency Forward Exchange Contracts
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on derivatives, net gains (losses)	(5,700,000)	(10,100,000)
Reclassification adjustment from AOCI on derivatives, tax expense (benefit)	1,300,000	2,400,000
Change in Fair Value of Derivatives Products | Commodity Swap Agreements
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on derivatives, net gains (losses)	(2,100,000)	(3,400,000)
Reclassification adjustment from AOCI on derivatives, tax expense (benefit)	500,000	800,000
Change in Fair Value of Derivatives Products | Interest Rate Derivatives
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on derivatives, net gains (losses)	300,000	(100,000)
Reclassification adjustment from AOCI on derivatives, tax expense (benefit)	$ 100,000
Change in Fair Value of Derivatives Products | Interest Rate Derivatives | Maximum
Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification adjustment from AOCI on derivatives, tax expense (benefit)		$ (100,000)

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Commitments and Contingencies - Additional Information (Details)	1 Months Ended		6 Months Ended
	Aug. 31, 2017 PRP	Mar. 31, 2016 USD ($) mi	Jun. 30, 2020 USD ($) entity mi	Dec. 31, 2019 USD ($)
Loss Contingencies [Line Items]
Accrual for environmental loss contingencies			$ 2,600,000	$ 2,500,000
Aggregate environmental accruals included in current other accrued liabilities			700,000	600,000
Amount which is better estimate within range			0	0
Remediation accrual balance if accrued at high end of the range of possible outcomes			16,000,000	16,000,000
Omega Chemical Corporation Superfund Site, Whittier | California
Loss Contingencies [Line Items]
Accrual for environmental loss contingencies			$ 300,000	300,000
Minimum | Omega Chemical Corporation Superfund Site, Whittier | California
Loss Contingencies [Line Items]
Contribution to waste tonnage (as a percent)			1.20%
Maximum | Omega Chemical Corporation Superfund Site, Whittier | California
Loss Contingencies [Line Items]
Contribution to waste tonnage (as a percent)			2.18%
Lower Passaic River
Loss Contingencies [Line Items]
Number of entities, in addition to Hexcel, who received a directive from the New Jersey Department of Environmental Protection | entity			48
Length of river to perform a Remedial Investigation/Feasibility Study (“RI/FS”) of environmental conditions | mi			17
Number of identified non governmental potentially responsible parties | PRP	120
Accrual for environmental loss contingencies			$ 2,000,000.0	$ 2,000,000.0
Lower Passaic River | Minimum
Loss Contingencies [Line Items]
Portion of the river for which Record of Decision setting forth the EPA's selected remedy (in miles) | mi		8
Expected cost of capping and dredging of the lower eight miles of the river by EPA		$ 970,000,000
Lower Passaic River | Maximum
Loss Contingencies [Line Items]
Portion of the river for which Record of Decision setting forth the EPA's selected remedy (in miles) | mi		9
Expected cost of capping and dredging of the lower eight miles of the river by EPA		$ 2,070,000,000.00

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Commitments and Contingencies - Schedule of Product Warranty (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2020	Mar. 31, 2020
Changes in accrued product warranty cost
Balance at the beginning of the period	$ 4.5	$ 5.5
Warranty expense		1.3
Deductions and other	(1.5)	(2.3)
Balance at the end of the period	3.0	4.5
Warranty expense		1.3
Deductions and other	(1.5)	(2.3)
Balance at the end of the period	$ 3.0	$ 4.5

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Other Operating Expense - Additional Information (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2020 USD ($) Job	Jun. 30, 2020 USD ($)
Other Operating Income Expense [Line Items]
Other operating expense	$ 13.1	$ 27.8
Percentage of labor costs eliminated	30.00%
Restructuring charge	$ 13.1
Maximum
Other Operating Income Expense [Line Items]
Number of jobs elimination | Job	1,500